2017: THE INFLECTION POINT OF INDIAN REAL ESTATE - 7 July 2017 - JLL India
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2017: THE INFLECTION POINT OF INDIAN REAL ESTATE 7 July 2017
As GST is modern India’s tryst with destiny, so is 2017 a red-letter year for Indian Realty, being witness
Executive Summary
to a multitude of policy measures. These range from RERA - the primary driver towards a more regulated,
transparent and accountable realty sector, to GST- a key inflection variable for sunrise sectors such as
Warehousing, Logistics and Manufacturing, to REITs which is a game changer for commercial assets. This
paper seeks to analyse these key inflection points within the ambit of a till date constricted industry, as well
as outlines its future outlook.
India’s hugely productive office & workspaces will witness a counter-balancing of the effects of
global economic vagaries, Trump’onomics, automation and dividends from India’s policy reforms &
demonetization. Office absorption will continue to see an upward trajectory, despite short-term setbacks.
In 2019, a net absorption of 34.3 mn. sq. ft. (up from 33.4 mn. sq. ft. in 2016) is expected and once again IT/
ITes will emerge the probable hero. With the first likely REIT listing towards end 2017, institutional investors
and HNIs will look keenly at commercial markets. 900 REIT worthy commercial Grade A assets equalling 280
mn. sq. ft. are estimated to be available across key cities. The potential of this investment, as and when it
starts yielding, will be a key reflection point for office markets.
Residences & Homes will be a key beneficiary of the big bang RERA (provided it is implemented true to
form). With it we are on the cusp of ushering in an era of greater transparency and accountability across
multiple stakeholders. Developers have already started aligning businesses to RERA guidelines and Brokers
will need to follow suit, else both are likely to fall by the wayside. Having said that, a marginal dip in
residential supply is forecasted in the near term, as only those developers capable of delivering on time will
undertake newer assets. And why not, since penalties for late deliveries are steep, not to mention the added
whiplash!
Affordable Housing will continue to see healthy supply, with 1Q 2017 witnessing maximum number of new
launches (35%) in the INR 3,000-4,000 per sq. ft. category across key cities. With the triumvirate of Modi,
Jaitley and Naidu granting Infrastructure Status to affordable products, developers heave a slight sigh
of relief on cheaper funding, including external commercial borrowings (ECB). Question to ponder - Since we
are now a ‘One Tax’ nation, can the days of a Uniform Affordability Code be far behind? Only time will tell!
Modern Retail will evolve as hubs of enhanced ‘experiences’, which will be key for its inflection in order to
counter balance the maelstrom of E-Commerce. The shifting ‘experience of retailing’ may be attributed to:
increasing disposable incomes, enhanced demographics, technology innovations, greater access to the web
and use of smartphones as well as emergence of alternative payment systems. Demonetization has led to
a less-cash economy and the consumer has adapted to it begrudgingly. 2017 appears to be a strong year in
terms of supply, with over 7.7 million sq. ft. expected to become shopper-ready. Good malls are witnessing
moderate - good pre-commitment levels - ranging between 51-75% of leasing.
The paper also looks at GST, and its impact on emerging sectors such
as Warehousing and Manufacturing, set to witness increased investor
interest - the recent IndoSpace platform investment by Canada Pension
Plan Investment Board evidences enough. Post 1st July 2017, supply chain
management and asset quality of warehouses should improve.
2017-The Inflection Point of Indian Real Estate being launched on the
sidelines of the 9th CII Real Estate & Infrastructure Conclave hopes the
implementation of these gigantic policy changes in 2017, albeit slow and
much awaited, will be seamless and advance the institutional development
of India’s hitherto cautionary real estate economy.
The glass seems to be half full, and awaiting a top-up!
Ramesh Nair
CEO & Country Head
JLL, India
2017: THE INFLECTION POINT OF INDIAN REAL ESTATE 2017: THE INFLECTION POINT OF INDIAN REAL ESTATE
Office Markets
Office markets continued to look attractive with Bengaluru showing the lowest office market vacancy
rate of 3.2% among all the top seven Indian cities in Q1 2017. Bengaluru and Mumbai accounted
for 60% of the total absorption during the quarter. IT/ITeS sector revenues were under pressure due
to increase in wage costs, appreciating rupee and changes in the industries to which the Indian IT
sector caters. However, with IT/ITeS companies looking to reskill employees, changing towards Agile
model of software development and looking for alternative areas of growth, we feel that the impact
on space requirements will be marginal. Technology is not only displacing current jobs, but also
creating new ones.
The impact of Trump’s policies on hires in the US is minimal. On the real estate front, there has been
no immediate change in terms of Request for Proposals (RFPs) floating in the market or the share
of the IT sector in leasing or the type of buildings presently being built by developers. Also, India
continues to be a cost-competitive market versus its other counterparts, which is a critical strength.
REITs markets are likely to kick-start in 2017 and will be a major inflection point for office markets.
2017: THE INFLECTION POINT OF INDIAN REAL ESTATE 2017: THE INFLECTION POINT OF INDIAN REAL ESTATE
Vacancy and Rents in Key Seven Cities
Stock Vacancy Rent
1Q17
(mn sq ft) (%) (INR psfpm)
CBDs 33 9.4% 124
SBDs 226 16% 102
Suburbs 221 27% 49
Pan - India 480 15% 77
NCR Delhi 96 30.2% 78
Kolkata 22 27.8% 50
108 17.2% 122
Mumbai
Pune
50 5.6% 62
Hyderabad 45 9.0% 50
102 3.2% 65 Bengaluru Chennai 57 10.3% 53
Key Trends 50
Supply, Absorption and Vacancy Trends 25.0%
44.4
42.0
40.0
39.9
40.5
39.2
38.5
New Completions/Absorption (million sq ft)
37.0
36.7
40 20.0%
36.6
34.3
34.9
33.4
33.5
32.7
30.9
29.9
30.0
29.4
26.8
26.8
30 15.0%
Vacancy (%)
21.6
India Office: Market Dashboard 20 10.0%
IT-driven cities continued to observe historically low vacancy levels
and the Pan-India vacancy levels were at 14.5% in Q1 2017. Higher net 10 5.0%
absorption relative to new addition, caused vacancy to reduce by 60
bps in Q1 2017.
0 0.0%
2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F 2019F
New Completions Net Absorption Vacancy
Source: Real Estate Intelligence Service (JLL), 1Q17
2017: THE INFLECTION POINT OF INDIAN REAL ESTATE 2017: THE INFLECTION POINT OF INDIAN REAL ESTATE
As can be seen below, across cities, IT corridors were trading at vacancy levels lower than the city level average vacancy.
This indicates that the demand for space by IT companies continued to be healthy. The maximum occupier share in JLL-REIS Office Rental Value Index
total lease transactions was also taken up by IT & ITeS companies (41%), followed by manufacturing (17%) in 2016. No
other industry is as space intensive as IT & ITeS. Other sectors like logistics often house their staff out of warehouses thus Rents in Bengaluru stood well above their previous peak followed by Pune & Chennai. Hyderabad is about to reach its
limiting their requirement for quality office space. peak rental level in upcoming quarters. Better infrastructure, affordable rents and good quality large floor plates have
This will ensure that IT & ITeS sectors will hold attracted many IT and consulting occupiers to Tier II cities like Hyderabad and Pune.
the largest share in leasing transactions.
Rental
RENTS DECLINE
REIS 1Q17 RENTS RECOVERING Value
City Level Vacancy v/s Vacancy in IT Corridors (Superior Assets) DECLINING SLOWING
Index
35.0% 2009 2010 2011 2012 2013 2014 2015 2016 1Q17
30.0% Bengaluru -17.7% 3.3% 10.8% 5.3% -0.6% 0.8% 6.8% 8.1% 121.2
Mumbai City -34.3% 0.8% 1.1% 0.8% 0.5% 0.2% -1.6% -0.3% 61.5
25.0%
Delhi City -41.6% 2.2% 3.2% 1.3% 0.0% 0.0% 0.5% -2.4% 58.2
20.0% Mumbai Suburbs -34.3% 0.0% 7.4% 1.1% 2.1% 0.6% 3.0% 2.3% 77.9
15.0% Gurgaon (Prime) -31.1% 2.8% 11.8% 5.7% 5.0% 1.0% 2.8% 0.3% 84.6
10.0% Gurgaon (Off Prime) -38.2% -2.4% 9.8% 4.4% 2.1% 0.7% 0.0% 1.4% 73.4
5.0% Noida -16.6% -9.0% 3.3% 2.7% 3.6% 0.2% 4.3% 3.1% 85.6
0.0% Chennai -22.4% 0.0% 6.4% 4.9% 4.4% 0.6% 3.5% 3.3% 100.0
Pune -20.7% 0.0% 3.4% 7.3% 6.8% 1.8% 10.6% 7.1% 100.7
NCR Delhi
NH8 - Prime
Mumbai
Navi Mumbai - Prime
Bengaluru
SBD - Outer Ring Road
Chennai
SBD OMR
Pune
SBD - East Pune
Hyderabad
Hitec City
Hyderabad -14.0% 0.0% 4.1% 5.1% 1.1% 1.1% 4.6% 6.8% 97.2
Kolkata -27.4% 0.0% 5.7% 8.2% -0.3% -0.5% 3.4% 1.0% 77.6
Note: Mumbai City includes CBD, SBD Central, SBD BKC
and SBD North. Mumbai Suburbs includes Eastern and
City Level Vacancy Vacancy in IT Corridors Western Suburbs. Delhi City includes CBD and SBD of Delhi.
Source: Real Estate Intelligence Service (JLL), 1Q17
Source: Real Estate Intelligence Service (JLL), 1Q17
Base for indexing - Rental levels of 3Q08
Occupier Share in leasing (by Industry)
100% 3% 4% 3%
8% 3% 7% 10%
4% 7% 4%
90% 10% 3%
5%
15% 7%
80% 26% 29% Miscellaneous
15%
70%
24% 17% E-Commerce
22% 17% Consultancy Business
60% 11%
17% 15% 12% Manufacturing/Industrial
50%
16% 14% 12% Telecom, Healthcare-Biotech,
8%
40% 11% 15% Real Estate Construction &
Allied Industries
30% BFSI
41%
20% 36% 39% 36% 38% IT & ITES
33%
10% Source: Real Estate Intelligence
Service (JLL), 1Q17
0%
2011 2012 2013 2014 2015 2016
2017: THE INFLECTION POINT OF INDIAN REAL ESTATE 2017: THE INFLECTION POINT OF INDIAN REAL ESTATE
53%
Industry wise share
in future leasing
IT/ITeS companies continue to occupy a majority
share in the presently active Request for Proposals
34% IT Sector-
US Policy Impact
(RFPs) for quality office spaces across the country.
3% 3% 4%
Miscellaneous Manufacturing/ E-Commerce Consultancy Telecom, Healthcare-Biotech, BFSI IT & ITES
Industrial Business Real Estate Construction &
Allied Industries
Source: Real Estate Intelligence Service (JLL), 1Q17
Share of IT/IT SEZ in Built Stock and Upcoming Supply
(from 2017-2020)
100%
90%
28% 32%
80%
70%
480 mn sq ft
145 mn sq ft
60%
50%
40%
72% 68%
30%
20%
10%
00%
Stock Upcoming Supply
While it is no surprise that 72% of the built office stock is IT/IT SEZ, going forward
too, IT/IT SEZ developments will be major contributors to the upcoming supply.
Source: Real Estate Intelligence
Service (JLL), 1Q17
2017: THE INFLECTION POINT OF INDIAN REAL ESTATE 2017: THE INFLECTION POINT OF INDIAN REAL ESTATE
Indian IT & ITeS Sector Indian IT & ITeS Sector:
• IT firms are now working towards
the Agile model of software
The Long Term Growth Story
development, which enables The long term growth story for IT/ITeS sector is strong because:
them to take up multiple smaller
projects, instead of focusing on
1 The ability of Indian firms to adopt to newer technologies.
Various Indian IT giants have started incubating smaller start-
mammoth projects for longer ups focusing on newer technologies.
durations
• The Indian IT & ITeS sector revenues • Because of broad macro trends, there
2 Newer technologies and automation initially
result in a temporary reduction in fresh hiring, but
are under pressure because of might be a temporary contraction of later on, they lead to a demand for outsourcing
- Increase in wage costs demand from companies offering only the management of processes and systems
- Appreciating rupee IT services. However, companies active
in the Business Process Management
- Significant changes in the industries
to which the Indian IT sector caters
(BPM) space shall continue to expand 3 Indian IT firms slowly and 4 Easy availability of quality
steadily, moving away from talent as well as presence
the sole USP of cost arbitrage of a young population (65%
towards other bigger benefits population under the age of 35)
• Technology and automation are 100%
affecting jobs at the lower end Indian
90%
of the value chain. IT companies
80%
IT/BPM 5 InIndian
terms of office rental values,
IT submarkets continue to
need to reskill their employees Revenue remain cheaper than most of the
(60-70% employees need to 70% 62%
143 USD Bn
350 USD Bn
be reskilled, as per NASSCOM 60% IT corridors in Asia Pacific
estimates) and also invest in 50% 95%
newer technologies and areas 40% 6 Technology is not only displacing existing jobs
like cloud computing, machine but also creating new jobs. Ability of Indian IT
Source: NASSCOM
30% Digital Tech
learning, artificial intelligence, firms to reskill their employees for new jobs will
data sciences, robotics, big data 20% 38% decide their growth trajectory going forward
Traditional Tech
analytics, social learning and 10%
digital marketing 00% 5%
2016 2025 Estimated
• ‘The Protect and Grow American Jobs Act’ is an executive order which proposes important
changes in the eligibility requirements for H1-B Visa applications like an increase in minimum
• Indian IT-BPM revenue is expected to
grow at a rate of 11% CAGR over the
• However, for now, it sure seems to
be a survival of not only the fittest The Trump wage to $130,000, which is more than double of the present limit of $60,000.
next decade, indicating that the long but also the most adaptable • The change ensures that the H1B programme is not misused to displace American workers
term Indian IT growth story is intact Effect and used only to complement American workers.
• USA offers 65,000 H1B visas globally every year, of which a majority are used by Indians,
especially from the IT sector. An additional 20,000 H1B visas are issued for international
students who have an American Masters Degree. These visas are then allotted through a
lottery. While there is no change proposed in the 65,000 limit, the bill proposes to remove the
Masters Degree exemption.
• Considering the proposed changes, IT companies are changing their hiring strategies, so as to
reduce their dependence on employees under the H1B visa programme by hiring more local
talent in the USA.
• The 65000 people which the USA invites under the H1B programme form only 0.0004 percent
of the 160 million strong American workforce. Also, the unemployment rate among skilled
workers is around two percent, which points towards a shortage of skilled talent in the USA.
• As per NASSCOM estimates, Indian IT firms support over 400,000 jobs through their USA
operations and have also paid over $20 billion dollars in taxes between 2011 and 2015.
2017: THE INFLECTION POINT OF INDIAN REAL ESTATE 2017: THE INFLECTION POINT OF INDIAN REAL ESTATE
REITs - The Key Change Driver
REITs is an investment tool that owns and operates real estate related assets and allows individual investors to earn
income through ownership of commercial real estate without actually having to buy it. The concept is similar to
mutual funds and provides its investors various income streams and long-term capital appreciation akin to mutual
funds. In India, the first REIT listing is expected this year.
REITs Impact on Commercial Assets:
Increased Liquidity: Higher Yield Assets: Superior Quality Assets: CBDs and SBDs
- Easier exit for Developers Investors can hope to With Investors looking to see maximum
earn higher yields (8- at superior asset quality Investments:
- Retail investors can invest
in commercial assets as 10%) compared with assets, we will see an overall With lower vacancies,
they get listed current residential increased focus on Facilities superior quality
yields (3-4% average) Management Business as buildings in CBDs and
- Global Institutional well as improved standards SBDs are likely to see
Investors can also of design and construction maximum REIT worthy
enter and exit Indian quality assets
commercial assets
As of 2016, over 500 REITs exist across various countries, with total market capitalisation of more than USD 900 billion.
Source: www.reits.com
In India, JLL estimates 280 mn. sq ft REIT-worthy office assets across the key seven cities and the
Grade-A universe is only expected to grow.
The Key Inflection
City wise REITs stock (Grade A Commercial)
REIT worthy commercial assets
(% of total Pan India stock)
Point - RIETs
16.5%
10.5%
28%
18%
14%
11%
2%
Bengaluru NCR Delhi Mumbai Chennai Pune Hyderabad Kolkata
Source: JLL Research
2017: THE INFLECTION POINT OF INDIAN REAL ESTATE 2017: THE INFLECTION POINT OF INDIAN REAL ESTATE
Outlook for Office Markets
US Policy Impact: For now, it is an evolving and a
dynamic situation. However, it is highly unlikely that USA
will be able to completely do away with outsourcing.
On the real estate front, there has been no immediate
change in terms of RFPs floating in the market or the
share of the IT sector in leasing or the type of buildings
presently being built by developers. Also, India
continues to be a cost-competitive market versus its
other counterparts, which is a critical strength. REAL ESTATE OUTLOOK -
IMPACT OF AUTOMATION
However, there is no denying the fact that Indian
IT companies do need to brace themselves to Near Term Medium Term
evolve and adapt to the triple force of automation, (1 year) (2-3 years)
new technologies like Artificial Intelligence and
protectionism, all at the same time.
IT/ITeS and BFSI to dominate leasing: Despite the
emergence of newer sectors like e-commerce, logistics, Some IT companies The impact
manufacturing etc. we expect the IT & ITeS sector along may revise real of growing
estate requirements automation will
with BFSI backend operations to continue to occupy a
downwards by 5-7%. be felt. Large
significant share in the overall office spaces pie. Automation will lead Occupiers (IT/
to lower fresh hires ITeS companies)
or job losses. But we can put pressure
REITs impact positive: With the likely introduction of expect IT/ITeS fraternity on developers
to adapt through to lower rentals.
REITs later in the year, we will see higher liquidity in
reskilling and exploring Lease terms may
commercial assets and rentals will look healthy. It will be new business avenues be shorter
a key inflection point.
Outlook
City wise outlook: Rents are likely to rise faster in low
vacancy markets of Pune, Bengaluru and Hyderabad in Current rentals will Stability in rentals with
a range of 6-8% y-o-y, while select other sub-markets remain stable as the possibility of a
such as Suburbs of Mumbai, NH8 of NCR and SBDs of vacancy across is at marginal 5-7 % revision
acceptable 15% levels downwards
Chennai will also fall into this category. The tier II cities
which are now showing momentum in the absorbtion of
spaces, should build more to meet the growing demand.
Note: The overall impact of automation will be
negligible in the commercial real estate markets
Healthy Supply Addition: Approximately 40 million sq ft as developers will adjust supply to recalibrate
of new space will be added each year from 2017-19. demand from large IT/ITeS companies
2017: THE INFLECTION POINT OF INDIAN REAL ESTATE 2017: THE INFLECTION POINT OF INDIAN REAL ESTATE
Residential
Markets
Residential markets witnessed the impact of the demonetisation drive with a slowdown in sales
in Q1 2017. However, units launched witnessed a noteworthy q-o-q rise of 11.8% compared
with Q4 2016. Pune was the highest contributor to quarterly supply across the seven cities in
Q1 2017, followed by Mumbai and Bengaluru. Most launches were seen in the mid-range and
affordable categories across all the cities.
Going forward, the implementation of RERA by state governments will be the key inflection
point for residential markets and we expect a slow and steady rise in capital values. Initially, this
will be a reflection of reduced supply, as only those developers confident of completing projects
timely will undertake new projects. Later, as the market becomes more transparent and well
regulated, end-users and investors will find their way back, keeping capital values up.
2017: THE INFLECTION POINT OF INDIAN REAL ESTATE 2017: THE INFLECTION POINT OF INDIAN REAL ESTATEIndia Residential Supply and Sales Trend
80,000 4,80,000
70,000
Number of Residential Unsold Units
4,60,000
Number of Residential Units
60,000
4,40,000
50,000
4,20,000
40,000
4,00,000
30,000
3,80,000
20,000
10,000 3,60,000
0 3,40,000
1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17
New Launches Units Sold Unsold Units Source: Real Estate Intelligence Service (JLL), 1Q17
In Q1 2017, Bengaluru was the biggest contributor to quarterly sales with a 26.6% share and was followed by
Mumbai with a 19.2% share. Pune was at the third spot with its contribution to quarterly sales being 18.9%.
Since 2014, new launches across
major cities of India declined. 2012-2015 saw a rise in unsold
Developers continued to focus on inventory due to shrinking
Residential sales continued
offloading unsold inventory rather demand. However in 2016, it
to dip over the last three
than on launching new projects. recorded a slight dip due to a
years on the back of home
buyers anticipating probable reduction in supply.
price correction.
The demonetisation drive
impacted sales in 1Q17 and Pune was the highest contributor
there was an overall slowdown to quarterly supply across the
In 1Q17, units launched
in construction activity. seven cities in 1Q17, followed by
witnessed a noteworthy
Mumbai and Bengaluru.
q-o-q rise of 11.8%
compared with 4Q16.
Most launches were seen
in the mid-range and
affordable categories across
all the cities.
Key Trends
2017: THE INFLECTION POINT OF INDIAN REAL ESTATE 2017: THE INFLECTION POINT OF INDIAN REAL ESTATEThe Key Inflection
India Residential
Capital Value Index Point: RERA
• Thane-Navi Mumbai and Pune continued to be
the front runners on capital value appreciation.
• NCR and Noida recorded reduced unsold
inventory q-o-q after a prolonged stagnancy.
Real Estate (Regulation and Development) Act, 2016 (RERA) Highlights
1 Developer can’t make any changes to the plan without the written
consent of the buyer
The property will have to be sold to buyers on the basis of carpet area
2
Source: REIS,
Capital Value Capital Value
Average Sales Current Sales Unsold Units Current
3 Registration is mandatory for all commercial and residential real estate projects where the
land is over 500 square meters or includes eight apartments & which are under-construction
4
Index (from Index (from
JLL 1Q17 Rate Rate Peak Unsold Units
Peak of 3Q08) Trough of 2Q09) If the project gets delayed the developer will have to pay interest on the
amount paid by buyer.
City 1Q17 1Q17 1Q08 - 1Q17 1Q17 1Q08-1Q17 1Q17
5
NCR-Delhi 118 145 13.6% 2.7% 184,591 159,169
Gurgaon 125 162 15.8% 3.1% 31,620 26,308 It is compulsory for a state to establish a State Real Estate Regulatory Authority
6
Noida and
Greater Noida 105 130 14.3% 2.5% 107,231 93,051
Failing to register a property will attract a penalty up to 10% of the project
Mumbai City 149 194 12.0% 7.0% 46,428 43,915 cost and a repeated violation could send the developer to jail
7
Thane 140 202 17.6% 12.9% 9,329 8,860
Navi Mumbai 160 205 12.6% 5.5% 27,216 25,888 Every phase of the project will be considered a standalone real estate
project and will need to obtain separate registration
Bengaluru 141 163 12.6% 9.4% 79,960 71,677
8
Chennai 137 160 13.2% 6.7% 58,156 40,933
Hyderabad 121 143 13.5% 5.6% 22,276 22,276 The developer will have to place 70% of the money collected from a buyer
Kolkata 156 188 14.3% 4.8% 27,175 23,522 in a separate escrow account to meet the construction cost of the project
Pune 171 203 17.3% 11.4% 36,669 36,669
Source: Real Estate Intelligence Service (JLL), 1Q17
Note: Figures represent the top seven cities of India - Mumbai, NCR-Delhi, Bangalore, Chennai, Pune, Hyderabad and Kolkata.
2017: THE INFLECTION POINT OF INDIAN REAL ESTATE
9 If the buyer finds any shortcomings in the project he can contact the
developer in writing within one year of taking possession
2017: THE INFLECTION POINT OF INDIAN REAL ESTATERERA Impact on Stakeholders Affordable
The Real Estate Regulatory Act (RERA) bill will have an impact across all stakeholders in the real estate markets. Overall
capital values are likely to go up across most cities as there will be a slow down in supply, while demand will remain
robust. A more regulated, transparent market will also see the eventual return of the investor, as he will see price rise
Housing
accompanied by with increased sales activity.
1 IMPACT ON DEVELOPERS IMPACT ON BUYERS
2 Beneficiary of Policy Initiatives
• The applicable exemptions for affordable housing will now be recognised on the basis of carpet area of 30 sq. m. and 60 sq. m. instead
of on the basis of saleable area. The 30 sq. m. limit will only be applicable within the corporation limits of the 4 major metros.
• Can’t Sell / Market / Advertise the project without • Increased transparency in transactions • For fringe areas of these metros and all other cities, it will be 60 sq. m. on carpet area. This will effectively serve to increase the number
registering the company with RERA of projects falling under this segment.
• Informed buying decision on account of easy
• Promoters of affordable housing projects have been provided a cushion of two additional years for project completion compared
• 70% of the Sale proceeds to be kept in separate access to information about the project
with the earlier 3 year period.
account and the same can be utilised only for the • Timely possession of property with no cost over
construction of the project • A 4% interest rate rebate on housing loans up to Rs. 9 lakh is available. The rebate stands at 3% on loans up to Rs. 12 lakh.
runs and much greater mental peace
• The joint development’s (JD’s) liability to pay capital gains tax will be in a year after the project is constructed. This will be beneficial for
• Developers can’t charge for
land owners and land prices can ease. This benefit can be passed on to home buyers.
area outside the walls
• The government has granted infrastructure status to affordable housing. Developers can enjoy cheaper sources of funding, including
external commercial borrowings (ECBs).
• As per Ministry data, while the construction proposals involve 18.76 million houses and INR 29,426 crore is the Central Assistance,
till now INR 9,256 crore has been released by the centre. But, due to delay in land acquisition, only 1.49 lakh houses have been
completed under PMAY (Urban) in 2016-17. Another 693,130 houses are under construction.
Price Category Wise Launches
100% 1% 2.8% 2.6% 2.6%
3% 3% 5% 4% 3.4% 3.3%
8.6% 6.4%
6% 4% 9% 4.9% 5.7% 8.2% 4.7% 3.4% Maximum new
8% 5%
2.1% 12.2% launches (35%) were
90% 4% 8.3% 9.5%
7% 7% 4% 6.9% 8.4% 6.5%
8% 11.8% in the Rs. 3,000-
IMPACT ON 4.0% 5.7%
IMPACT ON INVESTORS / PE 80%
17% 20.5% 6.6%
4.4% 4,000 psf category
INTERMEDIARIES / FUNDS
8%
17% 23% 20.2% 22.0% in 1Q2017 showing
% Number of Units in Total Units Launched
BROKERS 20.2%
20.2% 16.0%
the appetite for
70% 30% 15.6% 22.2%
• Can’t Sell / Market / Advertise the project without • Availability of data will protect them from affordable homes.
registering the company with RERA misrepresentations of developers 19%
60% 14% 21%
• All advertisements, marketing material of the • Transparency and strong regulations will see the 25.1% More than 15,000
project should have the registration number return of the investor 25% 20.1%
50% 23.5% 26.5% 17.9% 10,000 - 15,000
• The real estate agent shall maintain books of • PE Funds with a long term perspective will also 16% 36.1% 28.0%
accounts, records and documents separately for relook at investing in the market 38.2%
22% 7,500 - 10,000
40%
3 4
each real estate project 29%
24%
5,000 - 7,500
18% 25.4%
30%
23% 24.1% 31.1% 4,000 - 5,000
22.4% 22.5% 35.0%
20% 16.8% 3,000 - 4,000
27% 17.9%
23% 22% 24% 2,000 - 3,000
10% 13% 18.4%
9.6% 13.2% 12.3%
10.8% 10.2% Less than 2,000
7.0% 4.7%
3% 2% 1% 2.1% Source: REIS 1Q2017
0% 0% 0% 0.0% 0.4% 1.0%
1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 Note: All residential
prices are in Rs. psf
2017: THE INFLECTION POINT OF INDIAN REAL ESTATE 2017: THE INFLECTION POINT OF INDIAN REAL ESTATEOutlook for Residential Markets
Projects with smaller unit sizes will witness more traction than projects with larger unit sizes.
With the implementation of RERA, we expect a reduction in new launches across all cities as only those
developers confident of meeting timelines will undertake new projects.
With reducing new launches and a simultaneous dip in unsold inventory we should see a steep appreciation
in capital values. Capital values will rise across all cities in the near term, keeping in mind the inflation delta. In
NCR however, where there is an oversupply, we expect to see stability in capital values.
Post RERA, major developers are likely to enter into joint venture partnerships or undertake joint development
with smaller developers to complete stalled projects. Transparency in the market is expected to increase.
Home loan rates will look soft in the near future and this will give a boost to residential markets. In its recent
monetary policy announcement on 7 June 2017 the RBI, has reduced the amount of money, banks have to set
aside (as security) on home loans. Already banks like SBI have started lowering home loan rates.
Mid-Premium Category Impact: A Perspective
The impact of slowdown in the IT/ITeS sector on demand for mid-premium residential housing is likely to be felt-specially
in Bengaluru. If this bracket of consumers faces a serious risk of getting pink slips, there is a possibility that the recovery of
residential sector in the mid-premium category will be delayed. JLL India’s REIS data on project launches over the last five
years confirms this linkage here. The price category that middle management employees typically target are apartments in
the price range of Rs. 4,000-10,000 per sqft, which contributed close to 45% of the total project launches on an average in
the five-year period until 1Q2017.
Price-category distribution of residential projects launched
(quarterly average of last 5 years until 1Q17)
26% Price-category
Outlook
targetted by
21% middle managers
20%
18%
6% 5%
4%
2%
Less than 2,000 2,000 - 3,000 3,000 - 4,000 4,000 - 5,000 5,000 - 7,500 7,500 - 10,000 10,000 - 15,000 More than 15,000
Source: JLL REIS 1Q2017
2017: THE INFLECTION POINT OF INDIAN REAL ESTATE 2017: THE INFLECTION POINT OF INDIAN REAL ESTATERetail
Markets
The future of retail is becoming increasingly exciting with experience being rendered the
greatest emphasis by various stakeholders. This variety of experience will be the key inflection
point for the success of malls, with food and beverages and entertainment facilities increasing
in importance. Innovative developers are introducing new entertainment options in the
malls and retailers are trying to merge online experiences with offline ones to enhance the
experience of the consumers. This has been made possible with technological innovations.
On a pan-India level, against the net supply of -0.2 million sq. ft., an absorption of 0.2 million
sq. ft. was recorded in Q1 2017. Vacancy in superior Grade A malls was at a minimal 2% in
Chennai. Mumbai vacancy levels were at 8% and Bengaluru and NCR were at 5% and 10%
respectively. India’s overall vacancy remained unchanged at 14.8% in 1Q17.
2017: THE INFLECTION POINT OF INDIAN REAL ESTATE 2017: THE INFLECTION POINT OF INDIAN REAL ESTATEKey Trends Retail Real Estate Sector
Construction Status
• In terms of supply, 2017 appears to be a strong year, with
over 7.7 million sq. ft. of net supply expected to come on
stream
• One completion and six mall withdrawals (four in NCR and two in Pune) were recorded
• The good malls are witnessing moderate to good pre-
across the country in 1Q17, taking the total retail stock down to 74.6 million sq. ft.
Innovation required from retailers as well as developers commitment levels ranging between 51%-75%, whereas
• On a pan-India level, against the net supply of -0.2 million sq. ft., an absorption of 0.2 the average malls are seeing poor pre-commitments of
million sq. ft. was recorded in Q1 2017 0%-50%
• Strata selling by developers, poor mall management and average tenant mix resulting
• Key retail completions lined up for 2017 include the RMZ
in lack of demand led to failure of average malls
Mall in Bengaluru, Seawoods Grand Central in Mumbai,
• Successful/ Superior grade malls, however, continued to witness low vacancy levels
across cities Palladium Mall in Chennai, ICC Mall in Pune, DLF Mall
• Across the cities, increased private equity interest in retail assets was observed and Wave Hub Mall in NCR Delhi
• Key retailers already present in India, continued with their expansion plans. Dutch • Of the total retail supply expected in 2017, 48% is in the
apparel brand, Scotch & Soda entered India with their first stores in Mumbai and NCR.
ready for fit-outs stage while 52% is in the 50-100%
structure ready stage
Supply, Net Absorption and Vacancy of Retail Space in India 25%
• By end 2017, NCR Delhi will have a Grade A retail stock of
13 27.4 million sq. ft. while Mumbai is expected to have a stock
13.8
Completions / Absorption (million sq ft)
20% of 19.1 million sq. ft. for Grade A retail space
10.6
10.7
15%
Vacancy (%)
8 7.9
7.7
Construction Status of Future Supply
6.9
6.5
10%
5.7
of Retail Malls (2017- 2019)
5.6
5.1
4.5
4.5
4.2
4.1
4.2
4.0
3
3.6
1.3
3.3
2.7
100%
-0.3
5%
1.6
2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F 2019F 90% 18%
Stages of Construction for Expected Supply
-2 0%
80%
New Completions Net Absorption Vacancy
48% 47%
70%
Grade-wise Performance in Operational Malls 60%
Vacancy in
Operational NCR Delhi Mumbai Bengaluru Chennai Pune Hyderabad Kolkata India 50%
Malls 68%
40%
Superior 31%
Grade 10% 8% 5% 2% 14% 3% 12% 9% 30%
52%
20%
Average
Grade 15% 18% 7% 23% 31% 14% 16% 15% 10% 22%
11%
0% 3%
Poor 2017F 2018F 2019F
Grade 44% 39% 71% 41% 46% 17% 39% 41%
Ready for Fit-Outs Excavation / Upto Plinth
Note: New completions refer to the net completions i.e. difference in the stock positions of the current and the previous quarter. Source: JLL, 50-100% Structure Ready Proposed
Figures cover India’s seven metropolitan cities - NCR-Delhi, Mumbai, Bengaluru, Chennai, Hyderabad, Kolkata and Pune REIS 1Q17
Less than 50% Structure Ready Source: JLL, REIS 1Q17
2017: THE INFLECTION POINT OF INDIAN REAL ESTATE 2017: THE INFLECTION POINT OF INDIAN REAL ESTATERedefining Retail Spaces - Shopping malls have become an inevitable part of our
Enhancing Physical Experience society and community.
They have become more of a social and entertainment
destination than a destination only for shopping
SEAWOODS GRAND CENTRAL, Navi Mumbai is part of a Transit-Oriented development,
around the Seawoods -Darave railway station comprising:
• 800,000 sq. ft. retail space in the first phase and another 200,000 sq. ft. in the second phase • The thrust of successful malls is now much more on overall experience and enhanced customer service standards.
• Office with 4 million sq. ft. GFA coming up as part of the 40 acre project • From being shopping destinations to entertainment centres to food destinations, shopping malls across the world
• Multiplex and Entertainment zone in its second phase are being looked upon as one-stop destinations for a day’s outing. And this holds especially true for India.
• The brick and mortar malls would need to do much more than having a collection of brands.
• Food-Entertainment Cinema (FEC), is now an essential feature of a big destination mall, as it draws families to
the mall. It is likely to be the main anchor in malls. There will also be an increase in entertainment options where
diverse formats and scales of entertainment will emerge. Few malls which have devoted entire floors to F&B and
food courts are Oberoi, R City, Orion and Xperia mall in Mumbai.
MALL OF INDIA, Noida The retail, dining and lifestyle centre spread across 7 floors Mall-wise allocation for Entertainment and F&B
• Comprising 5 Customized Shopping Zones - Market Place, International Boulevard,
The High Street, Family World and Leisure Land Select DLF High Street DLF Mall Phoenix Orion Phoenix Inorbit
• 7 screen Multiplex City walk Promenade Phoenix of India Market City Bangalore Market City Malad
Delhi Delhi Mumbai Noida Whitefield Pune Mumbai
• 10% of total BUA dedicated to F&B and 20% to entertainment options like Ski India, Fun
City, Smaash and multiplex
13% 16% 15% 21% 13% 30% 16% 16%
Entertainment
13% 20% 6% 11% 11% 10% 8% 7%
F&B
SELECT CITYWALK, New Delhi: 1.3 million sq. ft. of Integrated upscale shopping comprising
55% 56% 58% 53% 51% 41% 59% 58%
• Approximately 6 lakh sq. ft. of retail space
Fashion
• 3 floors of office space
• Approximately 1 lakh sq. ft. of service apartments
9% 3% 14% 8% 12% 13% 9% 1%
• India’s first 6-screen multiplex
Convenience
2% 1% 4% 1% 6% 3% 3% 1%
Electronics
7% 1% 2% 5% 5% - 4% 11%
LULU INTERNATIONAL MALL, Kochi: 2.5 million sq. ft. upscale retail destination with Home & Related
• Approximately 1.7 million sq. ft. retail space
1% 3% 1% 1% 2% 3% 1% 6%
• 5,000 sq. ft. ice skating rink
• 9-screen multiplex Misc.
• 2,500 seater food court Note: Space allocation percentage in these malls dates back to 4Q16. Some allocation percentages may differ from the present .
Source: JLL Research 4Q16
2017: THE INFLECTION POINT OF INDIAN REAL ESTATE 2017: THE INFLECTION POINT OF INDIAN REAL ESTATERedefining Retail Space:
Experience as Inflection Point
Retail is being redefined for every stakeholder viz. retailers, investors,
Retail Spaces: developers and consumers in the real estate sector. This redefining has been a
result of the pace at which the ‘experience of retailing’ has been changing over
Technology Enhancing the last few years. The change in experience may be attributed to:
Experience • Changing incomes and demographic profiles of consumers
• Growing access to the internet and greatly increased use of
smartphones
Retail industry in India is witnessing an increased
• Emergence of alternative methods of payment
focus on leveraging technology across functions
of merchandising, supply chain, store operations, • Emergence of varied forms of entertainment
Omni-channel operations, customer engagement and availability of F&B options
and fulfilment . • Technological innovations
• Growing health and environmental consciousness
• Rising complexity of decision- making for consumers
• Technology: Dynamic and Unstoppable has significantly impacted consumers’ shopping patterns: the power that it
hands to consumers is arguably having the greatest impact on retailers and retail spaces. Redefining of Retail Places: Technological advancement and digital innovations have
ushered new life into retail spaces by integrating physical and digital experiences.
• Retailers: In this increasingly digital world retailers are finding ways to use technology to augment the physical
experience of customers. Both retailers and retail spaces have to contend with a growing urban population and one HomeLane.com, India’s leading online provider of home fit-out solutions, has launched.
that is increasingly knowledgeable and demanding. ‘Space Craft’, the world’s first virtual design platform that allows customers to visualize a
furnished 3D home in reality.
• Shopping Centers/Malls: Technology and data captured and analysed with the help of technology can do wonders
for effective and efficient mall management. It can make physical shopping more interesting by deploying
technology which benefits the mall, the customers and the retailer.
INNOVATIVE
RETAIL
Smart Shelves
Use of Wi-Fi Beacons
and Mobile Applications
TECHNOLOGIES Automatically monitor Retail-tainment- bringing leisure to shopping: By clubbing various fun activities viz.
(apps) inventory in stores and notify sports and gaming parlours, movie theatres and children’s play area with shopping
To customize brand offers the manager Inorbit Mall hosted Baccha Bollywood - film making workshop and an International
Clown Festival, a huge hit among all age groups.
Smart Mirrors Digital Signage
Help enhance shopping Push ads and price changes to
experience and offers stores in real-time, which creates
convenience for shoppers targeted sales for consumers.
Food-Entertainment-Cinema (FEC): This is increasingly becoming an integral part of the malls and tenant mix
Location Based Targeting MAPS Technology Intelligent Dashboards and allotment of space for FEC components has increased remarkably in malls.
To identify target customers Helps mall managers in handling and Reports
Points to the correlation Ambience Mall, Gurgaon a Mall of India, Noida has
and offer a loyalty/reward marketing campaign displays and
between footfalls and customer destination mall has dedicated dedicated approximately
solution which is in line with mall management teams in carrying
spends on any given day approximately 20% of the mall space 30% of the mall space to
customer expectations out large scale maintenance work
to F&B and FEC components. F&B and FEC components.
2017: THE INFLECTION POINT OF INDIAN REAL ESTATE 2017: THE INFLECTION POINT OF INDIAN REAL ESTATEOutlook Outlook For Retail Markets
POLICY SUPPORT REQUIRED
• The government has to facilitate growth by preparing clear policies for the retail sector and creating
retail zones thereby reducing infrastructure bottlenecks.
• Recent FDI retail policy and state-level retail policies, where the government is taking up the role of a
facilitator to create an environment conducive to the retail business, are steps in the right direction.
• While consumer adoption, technology progress and retailer push have been the key drivers,
government initiatives will further propel omni-channel retailing.
DEMONETIZATION IMPACT ON TECHNOLOGY ADOPTION
• The demonetization drive has catapulted the digitalization momentum in the Indian economy
resulting in a spectacular growth of mobile wallets and card payments. While the economic
indicators have dipped temporarily, the impact is not likely to be long term.
• The impetus for digital payments will accelerate the technology adoption rate in the country.
CO-EXISTENCE OF ONLINE AND OFFLINE CHANNELS
• A right combination of omni-channel will be the way forward. We would see waves in both
directions, i.e. movement from online only to omni-channel as well as offline only to omni-channel.
• Investment in technology infrastructure will enhance the quality of consumer experience as well as
the security of online transactions. This will attract more consumers to online retail.
REITS - THE FUTURE KEY DRIVER
• With the advent of REITs in the near future, the quality of malls is expected to improve and the
concept of strata sale of properties is expected to reduce considerably.
GST IMPACT
• With GST, rationalization of taxes at different levels, improvement in ease of doing business, as
movement of retail goods and raw materials will be easier.
• Reduction in final prices of certain items, due to a reduction in transportation costs as well as the
cost of raw material post-GST will strengthen sales.
2017: THE INFLECTION POINT OF INDIAN REAL ESTATE 2017: THE INFLECTION POINT OF INDIAN REAL ESTATEEmerging
Sectors GST impact on Warehousing
and Manufacturing
GST, the biggest tax reform independent India has ever witnessed, will have a
positive impact on supply chain management and the quality of warehousing
assets across India. It will also lead to larger warehouses and open up new
warehousing destinations as tax efficiency will no longer be the motivation
for the location of a warehousing hub. Warehouses are expected to have
‘economics of scale’ thus increasing Per Cubic Metre storage efficiency of
warehouses.
While the overall impact of GST will be positive for the manufacturing sector,
the exclusion of Petroleum from GST will be a dampener. Petroleum products
such as high-speed diesel, are common fuels used in various manufacturing
processes.
Emerging Sector - REITs
The first REIT listing is likely towards end 2017 and the biggest impact
will be on commercial assets. Some of the largest developers will be seen
keen to list their assets. Overall we expect a greater push towards asset
maintenance and greater liquidity for developers.
2017: THE INFLECTION POINT OF INDIAN REAL ESTATE 2017: THE INFLECTION POINT OF INDIAN REAL ESTATEPost GST- Emerging Warehousing Locations
GST Highlights
Goods & Services Tax (GST) is a multi-stage tax on
domestic consumption and will be charged on all
taxable supplies of goods and services in India except
those specifically exempted. India has adopted a Established Upcoming Proximity to The Centre of Gravity Dynamics
Hubs Hubs Consumption Centres
four-tier tax structure of 5%, 12%, 18% and 28%. The • Post the GST implementation, if any manufacturer
NCR - Delhi Ludhiana Nagpur Traditional warehousing has uniform sales distribution/consumer market
rate applicable on most products will be 18%. across the country and wants to have a single
Mumbai Kanpur / Lucknow locations are either
distribution centre (DC) to cater to the entire
GST Rates Chennai Guwahati Indore
seaport led, consumption
country, the DC would be typically located near the
led or facilitator-led. The
Service Building Bricks 5% Bengaluru Bhubaneshwar Jaipur country’s geometrical Centre of Gravity (CG) (i.e.,
upcoming hubs are either equidistant from all parts of the country).
Tax Iron and Steel 18% Kolkata Vijayawada Kochi large manufacturing hubs
Excise Luxury themselves or located within
• However, the consumer demand and market size
Commercial Lease Agreement 18% of each product type is very different and complex.
Duty Tax Hyderabad Coimbatore Patna
3-4 hours of travel time to a
Cement 28% The larger the market size, the greater is the pull
Pune Kolhapur Vapi large density of population, force of the CG toward it.
Wall Paper 28% Ahmedabad providing proximity to • Consumer demand typically is skewed more
GST
Paints and Varnishes 28% consumption centres, rather toward the northern, western and southern regions
than providing tax efficiency. of the country, thus pulling the CG toward it.
CST CVD Wall Fittings 28%
Plaster 28%
Ceramic Tiles 28%
Sanitary Ware 12%
Works Contract 12%
Entry Lottery F&B 18%
Tax Tax
Budget Hotels (Tariff 1000-2500) 12%
The Landscape of
Budget Hotels (Tariff 2500-5000) 18% LUDHIANA Indian Warehousing
Luxury Hotels (Tariff above 5000) 28%
ADC CST Restaurants (Non Air conditioned) 12% NCR DELHI
Restaurants (Air conditioned) 18%
Levies Small Restaurants (Turnover less than 50 lakh) 5%
LUCKNOW
Restaurants in Luxury Hotels 28% JAIPUR
GST to subsume multiple indirect taxes GUWAHATI
Source: www.cbec.gov.in KANPUR
PATNA
GST - The Inflection Point for Warehousing AHMEDABAD
INDORE
REDUCED COST Impact: Reduction in tax cascading may lead to lower cost of production, which can eventually KOLKATA
OF PRODUCTION be passed on to consumers.
VAPI BHUBANESHWAR
NAGPUR
Impact: State-border check points for scrutiny and location based tax compliance, which
QUICKER SUPPLY MUMBAI
accounts for almost 60% of a truck’s transit time, can hugely reduce, thus quicken supply.
PUNE
HYDERABAD
Impact: Organizations will now be able to explore a different distribution model from the
HUB AND SPOKE KOLHAPUR
TO RULE traditional carrying and forwarding (C&F) distributor-based models. Growing demand for Larger VIJAYAWADA
Hubs / Regional Distribution Centre as well as Smaller ‘Spoke’ warehouses.
Established Hubs
Impact: Post GST, the focus would shift on efficiency rather than tax saving through smaller Upcoming Hubs
CONSOLIDATION warehouses. Companies to re-structure their warehousing portfolio to bring in larger and
‘supply - chain’ efficient warehouses, typically built to their specific warehouse requirements. BENGALURU
CHENNAI
MORE ORGANIZED Impact: Existing organized warehousing developers can expect significant increase in demand. COIMBATORE
PLAYERS More organized players are expected to enter the sector.
KOCHI
Impact: Efficient warehouse management is expected to boost the sector as the warehouses
EFFICIENT
WAREHOUSES are expected to have ‘economics of scale’ thus increasing Per Cubic Metre storage efficiency of Source: Indian Manufacturing and Logistics: On a Roller Coaster Ride, JLL- Jan 2017
warehouses.
2017: THE INFLECTION POINT OF INDIAN REAL ESTATE 2017: THE INFLECTION POINT OF INDIAN REAL ESTATEManufacturing Highlights
Outlook Probable Impacts on Product
Supply Chain END OF
18TH
CENTURY
Industrial Revolution Chronology
Procurement 1st Industrial Revolution (IR 1):
Mechanical Production Facilities were introduced, which
used the power of Water and Steam.
Focus was on how Focus can shift
to save tax and get to quality of raw
financial incentives material.
BEGINNING
The current Grade A supply in India is expected to grow. OF 20TH
CENTURY
As per JLL estimates, Grade A and B warehousing stock is at
112 mn .sq.ft. and is expected to grow. Organized warehousing
developers will play a significant role in framing the warehousing
Manufacturer 2nd Industrial Revolution (IR 2):
landscape in short to medium term.
Mass production was introduced which used electrical energy.
Selection of location Focus can shift to other
Grade-A & Grade-B Warehouse Stock 2016 was dominated by important factors like
29.3
30.0 state’s tax benefits & proximity to market or BEGINNING
Warehouse Stock (million sq ft)
25.0 financial advantage. raw material. OF 1970S
20.0 20.5
24.2
17.5
15.0
12.8
17.1 10.5 10.4
3rd Industrial Revolution (IR 3):
10.0 5.4 9.1 8.6 Electronics and IT were introduced in Manufacturing sector,
4.5
5.0 3.8 7.1 7.0 Distributor with further automated production.
6.9 7.4
3.2 3.4 5.0 6.0
0.0 0.6 2.0 1.6
Ahmedabad Mumbai Bengaluru Pune New Delhi Chennai Kolkata Hyderabad
Grade A 17-25 21-28 18-22 20-35 19-22 18-30 12-22 12-20 Tax collected by Input tax credit will be
Grade B 11-16 11-21 11-16 16-25 10-28 12-28 10-19 11-19 manufacturer not available (subject to PRESENT
Rental Warehouse - 2016, INR/sq ft/month) adjusted against tax conditions) which will
Note: ‘City wise warehouse (WH) stock of 2016 consists of Grade A and Grade B. It collected from the retailer in-turn reduce the
does not include the stock owned by the Govt., ICD, FTWZ and captive warehousing
for interstate sales. tax burden.
stock of manufacturing companies that are within or beyond their premises.’
4th Industrial Revolution (IR 4): ) Cyber physical production systems and
Y-O-Y Warehouse Stock Grade-A & Grade-B ‘Artificial Intelligence’ are expected to be introduced in manufacturing.
(2014-2018)
Retailer
Warehouse Space (million sq ft)
157.1
150.0
132.5
111.9 102.7 Final price to consumer Focus on the quality
100.0 96.8
79.8 90.1 may be higher when of goods consumers The Smart City Initiative is Make in India initiative India’s thrust towards the
70.9
79.0 manufacturer is from get, as the taxes will also expected to have an will join hands with ‘Digital India’ initiative
50.0 59.5 another state. be uniform. impact on IR4 in India IR4 in India is in line with IR 4 mission
54.4
25.9 32.9 42.4
0.0 20.3
2014 2015 2016 2017* 2018*
Grade A Grade B
Note:*Forecast numbers Manufacturing Industry Update: The Government of India has set the target of increasing the contribution of manufacturing
Source: Indian Manufacturing and Logistics: On a Roller Coaster Ride, JLL- Jan 2017 output to 25 per cent of Gross Domestic Product (GDP) by 2025, from 16 per cent currently. Prime Minister of India,
Consumer
Mr. Narendra Modi, had launched the ‘Make in India’ program to place India on the world map as a manufacturing hub and
give global recognition to the Indian economy. India is expected to become the fifth largest manufacturing country in the
world by the end of the year 2020.
Investments: Foreign Direct Investment (FDI) inflows in India’s manufacturing sector grew by 82 percent year-on-year to US$
16.13 billion during April-November 2016.
(Source:www.ibef.org)
2017: THE INFLECTION POINT OF INDIAN REAL ESTATE 2017: THE INFLECTION POINT OF INDIAN REAL ESTATEGST - The Inflection Point for Manufacturing
Emerging Sector - REITs
Probable Impacts on Product Supply Chain
Overall reduction of
cascading effect of taxes The first REIT listing is likely towards end 2017 and the biggest impact
will be on commercial assets. Some of the largest developers will be
Positive Impact on cost of seen keen to list their assets. Overall we expect greater push towards
manufactured products for consumer asset maintenance and greater liquidity for developers.
as raw material cost and production
cost reduce
Supply chain will be better managed, JIT
management philosophy, less wastage
Earlier the state based indirect tax
system required manufacturers to Reduction of
transportation time
set up local warehouses to save cost. and costs
The GST system will ensure lesser
Warehouse setup requirement. Removal of multiple
These savings will help the checkpoints and
manufacturers in capacity buildup permits at state border
and produce more economically. checkpoints will save road
hours and reduce costs
Advent of geographical
business locations
The decision of setting up business/
logistics/warehousing location Larger Warehouses
will now be dealt by geographical will come up
positioning and not on tax based
Consolidation of smaller
decisions. Many new locations will
warehouses into larger,
come up as attractive warehousing
superior quality ones will
or logistic bases.
take place.
A REIT is a legal entity that owns, and in most cases, operates income-producing real estate and in some cases finances it
also. REITs must distribute it’s after-tax income to shareholders annually in the form of dividends. As per proposed SEBI
regulations, not less than 90% of its annual net income after tax shall be distributed in the form of dividends. Recent clarity
While the overall impact of GST will be positive for the manufacturing sector, the exclusion of Petroleum from GST will be a
on Dividend Distribution Tax, and SEBI measures like : allowing 20% investment in under - construction projects (up from
dampener. Petroleum products such as high speed diesel, are common fuels used in various manufacturing processes, as
10% earlier), allowing larger number of sponsors and restructuring laws on SPVs will help investments into the REITs markets.
also for transportation of inputs and final products.
2017: THE INFLECTION POINT OF INDIAN REAL ESTATE 2017: THE INFLECTION POINT OF INDIAN REAL ESTATEKey Conditions for REIT Listing in India
Compulsory
registration with
SEBI
Minimum size of
assets under REIT
- INR 500 crore
Minimum IPO
size of REIT - INR
250 crore
Sponsors
required to hold
minimum 15%
(25% for the first
Conclusion
We are living in an era where policy reforms are being undertaken with great dynamism. The
(USD 83 mn) (USD 42 mn) biggest tax reform in the history of Independent India, along-with the biggest regulatory
3 years)
reform in Real Estate markets have come together in 2017. Technology too, is marching forth
Minimum Initial offer with its own brand of attendant changes. Undoubtedly, the ground has shaken. It will bring
Consolidated subscription size for 45 days forth a fresh harvest in the form of new physical spaces in real estate markets and new ways of
borrowings + Minimum public
for unit holders - Follow-on offer for doing business. The fruits of these reforms will be shared by all stakeholders.
Deferred payments float - 25%
INR 2 lakhs (USD 3,333) 30 days
should not be more Minimum no of Till the market develops,
than 50% of value only HNIs and Institutions
Listing compulsory
unit holders - 200 within 12 days
of REIT assets will have participating
rights in REITs of closure
Minimum REIT should REIT can retain Minimum
controlling stake invest in minimum oversubscription holding
in any property 2 properties with to the extent of period for any
(directly or along not more than 25% of the issue investment by
with SPV) should 60% stake in any size REIT is 3 years
be 50%
Contacts
one of them
Authors
3 Phases of REIT Listing Neel Lalka
Assistant Manager
Srija Banerjee
Assistant Manager
Ketan Bhingadre
Assistant Manager
Ajay Barve
Manager
DECISION TO GO FUNDS Research & REIS Research & REIS Research & REIS Research & REIS
FOR ISSUE TRANSFERRED neel.lalka@ap.jll.com srijs.banerjee@ap.jll.com ketan.bhingarde@ap.jll.com ajay.barve@ap.jll.com
APPOINTMENT For More Information About Research
LISTING
OF MB Ashutosh Limaye
Head, Research and REIS
DUE
REITs FINAL OFFER
+91 98211 07054
ashutosh.limaye@ap.jll.com
DILIGENCE DOCUMENT
Editor
DRAFTING OF PRICING & Niharika Bisaria
Editor
DOCUMENT ALLOCATION +91 98337 91999
niharika.bisaria@ap.jll.com
PRE
FILING WITH SEBI PLACEMENT & PRICING BOOK
SEBI & SE(S) CLEARANCE MARKETING WITH MB BUILDING Strategic Oversight
Chandranath Dey
Associate Director
chandranath.dey@ap.jll.com
PREPARATION ESTIMATION LAUNCH
& OF PRICE & With supporting contributions from
APPROVALS RANGE COMPLETION Sparsh Sharma Rohan Sharma Akshit Shah
Manager Associate Director Associate Director
sparsh.sharma@ap.jll.com rohan.sharma@ap.jll.com akshit.shah@ap.jll.com
2017: THE INFLECTION POINT OF INDIAN REAL ESTATE 2017: THE INFLECTION POINT OF INDIAN REAL ESTATEYou can also read
