26 June 2018

1. INR 2,500 crore premium from extra FSI to fund Bandra-Versova sea link

The state government will provide viablility gap funding of Rs 2,500 crore for the proposed Bandra-Versova sea link from the premium that is collected by selling fungible floor space index (FSI) to builders.

(Source: Times of India, 18 June, 2018)

Research View

Maharashtra State Road Development Corporation (MSRDC) was given a green signal in December, 2017 to construct the 17 km Bandra-Versova Sea Link, which would serve as the northwards extension of the existing 5.6 km Bandra-Worli Sea Link. The state government will provide viability gap funding of INR 2,500 crore for the proposed Bandra-Versova sea link from the premium, that is collected by selling fungible floor space index (FSI) to builders. Of the total project cost of INR 9,500 crore, the government will fund a quarter, the MSRDC is investing INR 2,000 crore and another INR 5,000 crore is being raised as a loan. The project’s construction is expected to begin in September 2018, with an expected completion timeline of 2023. While a final verdict on the draft DP is yet to decide the fate of this proposal, once approved and operational, this infrastructure initiative will enhance connectivity by reducing the travel time between the western suburbs and prime commercial business districts in Bandra and South Mumbai to almost 20%. The commuters travelling to South Mumbai from western suburbs can skip the Western Express Highway and can use sea links for the commute, which would have connectors at Bandra, Otters Club, the Juhu Link Road and the Versova Link Road. With enhanced connectivity from the northern suburbs, the crowded areas of Andheri, Vile Parle are expected to be decongested and relieve the excessive pressure on the Western Express Highway and S.V. Road. The residential property prices in suburbs of Kandivali, Borivali and Mira Road are expected to witness an upward trend owing to growing connectivity. However, on the flip side, this could make the already expensive property market of Mumbai unaffordable for the homebuyers as the new infrastructure is speculated to make the cost of buying a home in Mumbai unrealistic.

2. IndiQube leases 80,000 sq ft space in Hyderabad

IndiQube, a shared space provider, has leased a building from Ramky Group in Hi-Tech City, Hyderabad. The space is spread across 80,000 sq ft and will be operational by year-end.

(Source: ETRealty, 15 June, 2018)

Research View

Flexible workspace operator, IndiQube has recently leased an 80,000 sq ft (7400 sq m) ground+4 floor commercial building by Ramky Group in Hi-Tech City, Hyderabad. The company is in the expansion spree and has also leased about 80,000 sq ft in Bengaluru’s CV Raman Nagar, Hebbal, Koramangala and Indira Nagar locations, and about 45,000 sq ft (4180 sq m) in Pune’s Kharadi and Magarpatta City. As per secondary sources, the company has recently raised about INR 100 crore (USD15 million) in funding led by WestBridge Capital in June, 2018 to further expand its presence across Indian cities. In addition, flexible office space market leaders such as Wework and Awfis are also highly active in their investment plans in India. Wework has plans to invest about INR1300 crore (USD 200 million) over the next five years and Awfis, backed by the venture capital firm, Sequoia raised about INR130 crore (USD 20 million) funding in 2017 and has announced plans to expand across Tier-2 cities in 2018. Other companies such as 91springboard, Innov8 and Instaoffice have also been active in fundraising since 2017. In our opinion, the increase in focus towards flexible office spaces has become one of the biggest shifts in office space strategies in India over 2016-2018. Over the last two years (2016 and 2017), the flexible office operators leased more than 4.6 million sq ft (0.4 million sq m) in India, and we expect the momentum to continue over 2018-2020 as well. With low vacancy rates and rising rents in Grade A properties being a concern in key micromarkets of cities such as Hyderabad, Bengaluru, Pune and Chennai flexible workspaces are likely to further gear up against traditional offices as they have started enticing medium and large occupiers as well and not limited to startups and freelancers anymore.

3. HDFC Capital buys stake in Homekraft; to create $300 mn affordable housing platform

HomeKraft to invest over $300 million for development of affordable and mid-income housing across India with a mix of internal accruals, debt and private equity funds.

(Source: Moneycontrol, 11 June, 2018)

Research View

The HDFC Capital Advisors, a wholly-owned subsidiary of India’s largest mortgage provider HDFC Bank, has acquired a minority stake in real estate developer ATS Group’s new affordable housing segment called ‘Homekraft’. Earlier this year in March, ATS launched its 1st project under Homekraft brand situated in Greater NOIDA. The newly formed brand is envisaged to develop affordable to mid-segment residential products catering to the urban population looking for housing units in the range of INR 30-70 Lakhs (USD44,000-USD100,000). The Homekraft platform of ATS targets to invest over USD 300 million for the development of affordable to mid-income housing focused in the tier-I and Tier-III cities across India. Earlier this year, International Finance Corporation (IFC) invested about USD 22.5 million in Delhi-based developer Ashiana Housing’s affordable residential platform. This investment trend in the affordable housing segment can be seen as a healthy sign of the growth, which is expected to continue going forward. The affordable housing sector has been given the required push by the government in form of incentives for buyers like the recent increase of carpet area of houses eligible for interest subsidy. As a result, a number of private developers are evaluating the affordable housing projects, however, the participation is limited so far. Few of the major private players in the affordable housing sector include Tata Smart Value Homes with their Shubh Griha brand, Mahindra under the Happinest brand, Shapoorji- Pallonji under the Joyville brand, and a number of other local private developers.

Contact for more information

Colliers International | Mumbai, Indiabulls Finance Centre, 17th Floor, Unit No. 1701, Tower 3, Senapati Bapat Marg, Elphinstone (W), Mumbai 400 013, Maharashtra, India | Tel: +91 022 4924 9780