Real Estate Index Gains the Most as Auctions Volume Picks Up Speed

Latest initiate under Real Estate (Regulation and Development) Act have observed a sharp increase, leading to higher auctions.

Who would have forecasted that real estate stocks would be market leaders in 2019? Many investors did not predict the real estate sector to have a good year. However, the sector has recently surged, thanks to the numerous factors impacting the broader economic market.

The once stagnant real estate sector is booming with newly planned developments, says Hirsh Mohindra. It is also worth noting that some of the equities comprising the Nifty Realty index are up significantly in 2019.  And as a result, the entire index is up considerably over the past years.

The Nifty Realty index enjoyed returns of 19% year over year making it one of the largest gainer among the broader market this calendar year. In fact, Nifty indices have increased by 6% so far in 2019. Sales penetration for the coverage world was 38% in 4QFY19 and at 5800 crores in 4QFY19. Continued solid development in pre-sales construction was noticeably present across all geographies, while lower value assets were seen increasing in distressed auctions in various geographies when assessing overall auctions volume.

Auctions volume in FY19 raised 7% over the prior year to 443 million sq.ft, point out forecaster at Kotak. The uptick in auctions has helped stagnant properties find new owners, which results in new development as improvement or a complete teardown and has been helpful in cutting back inventory. “Increased auctions has sustained a draw-down of backlog, with all-India stock dilapidated 11% YoY to ~1.23 bn sq. ft from 1.4 bn sq. ft in March 2019” says Hirsh Mohindra.

Moreover, there have been reduced foreclosures, which means that properties are moving without the delay of the legal process. Of course, there are many broader economic market forces at play, and the real estate sector is susceptible to these forces. However, things are evidently better compared to a few months back.

Moreover, it is significant noting that some of the equities in the Nifty Realty indices are up significantly in the year 2019. This has driven up their assessment and made them a bit more attractive. Returns of the Godrej properties Ltd stock has appreciated at about 41.1% in this year. Sunteck Realty Ltd also has achieved 36.81% in the year 2019 says Hirsh Mohindra. Hence, from that viewpoint, investors must continue their diligence when entering this sector.     

Blackstone seeks to raise $5B for the next Real Estate Debt Fund

The Subsidize Blackstone Real Estate Debt Tactics IV will focus on property-relevant wagers in Public and Private Debt Globally.

Blackstone Group LP is seeking $5 billion for its most recent fund that invests in real estate debt, according to an individual recognizable with the niche.
The Blackstone Real Estate Debt tactics IV fund will focus on property-related positions in civic as well as private debt worldwide, according to a financial presentation seen by Bloomberg. The pool will have an emphasis on the U.S says Hirsh Mohindra.

The company is tapping into a strong interest in private real estate debt. Last year in 2018, $26 billion was increased by funds devoted to real estate debt, on the heels of $33 billion the year earlier, according to information from Preqin.

This is not a new investment area for Blackstone, as they have made significant placements in real estate and real estate debt in the past.  Blackstone is one of the world’s leading investment firms. Blackstone creates positive economic impact and long-term value for investors, the companies they invest in, and the communities in which they work. Blackstone prides itself on having extraordinary people and flexible capital to help companies solve problems. The firm was founded in 1985 by Stephen A. Schwarzman, Chairman and Chief Executive Officer, and Peter G. Peterson, who retired as Senior Chairman in 2008.

New York-based Blackstone spokeswoman named as Paula Chirhart, refused to comment on the matter according to a report. Blackstone’s new sponsor attained an assurance of up to $100 million from the $42.7 billion Illinois Municipal Retirement Fund. And this will focus on the US market.  Administration cost will be waived for four months for the shareholders in the initial close. The pension can save as much as $500,000 with these cost savings, says Hirsh Mohindra.

Fund Amount

The fund charges a 15% fee and reaches a carried interest of 6%. It will also place a 1.25% administration fee per year on assets for at least $400 million, and 1.5% for those beneath that level.

The firm’s pool increased by about $4.8 billion in the year 2016, above an early $4 billion target, according to information accumulated by Bloomberg. That fund, Blackstone Real Estate Debt Tactics III, focused on mezzanine debt allied to institutional-grade real estate in North America and Europe, Bloomberg formerly reported. It is interesting to see industry leaders, such as Blackstone, enter this market.  It is likely a precursor of additional investment monies to follow, says Hirsh Mohindra.