Cushman and Wakefield
Investment in real estate fell
by 65 per cent in 2013
The decline is a sign that investors are cautious about backing projects amid economic downturn
Investment in real estate fell 65% in 2013: Cushman and Wakefield report. In terms of value of investments, $1.2 billion was invested in the real estate sector in 2013, of which investment in land was $838 million.
Mumbai: The Indian real estate sector saw a significant drop in investments in 2013, a sign that investors are cautious about backing projects amid economic downturn. According to a report titled Investment Market beat 2013 by property advisory Cushman and Wakefield, investments in India’s real estate sector dropped 65% in 2013 compared to a year ago.
Among different segments within the industry, investments in the hotel industry have dipped the most by 87%, those in land declined 61%, while investments in the office space saw a drop of 77%, the report adds.
In terms of value of investments, approximately $1.2 billion was invested in the real estate sector in 2013, of which investment in land was the highest at $838 million.
The hotels segment received approximately $11 million in investments.
Real estate investors have in recent times shied away from investing in new projects due to an uncertain political environment and a slowing economy. The Indian economy grew at a decade’s low of 4.5% in the last fiscal year and is forecast to clock less than 5% growth in the current year. Many believe that the general election, scheduled for April-May, are key to revival in the economy.
Developers say that while investors have been selective about projects due to the sluggish economic conditions, there are some indications of a pick-up in interest.
“Investors have been cautious lately, and there is no mad rush for projects, but there is a lot of money available for good projects and some appetite from foreign direct investors (FDI),” said Irfan Razack, chairman and managing director of Prestige Estate Projects Ltd., the real estate arm of the Prestige Group.
The group has launched more than 14 million sq.ft in the last fiscal, and is currently constructing more than 60 million s.ft across all segments.
Hotel developers share the view. Slow economic growth has hit the tourism industry and consumer spending, which has spilled over into the hospitality industry, which has been battling low occupancy rates and overcapacity.
According to the Federation of Hotels and Restaurant Association of India’s (FHRAI) Indian Hotel Survey 2012-13, occupancy levels for 2012-2013, were at 60.4%, slightly lower than 60.9% a year ago.
For the hotel industry, “project viability has become of paramount importance”, said Deepak Sarin, chief operating officer of JHM Interstate India Hotels and Resorts. JHM engages in design and construction, development and management of hotels all over India.