Dear KIREF Investor,
The Real Estate market continues to grapple with several challenges.A multitude of
regulations and a slow judicial system has locked up vast quantities of Real Estate in
extra legal ownership.This, if unleashed can be very productive capital. Hernando De
Soto a noted Peruvian economist's work in Real Estate market in developing
economies sums it all up. His studies have concluded that the value of extra legal Real
Estate is many times greater than the total time and savings deposits in banks, the
market value of companies in the country, the value of PSUs to be privatized, all
Foreign Direct Investments - ALL PUTTOGETHER!!!
However, the good news is we are on ourway to unlock this power of wealth creation.
The JLL transparency index has upgraded India's Real Estate market transparency
level and we are seeing several states taking proactive steps to make the market
efficient. The Urban Land Ceiling act has been abolished in most states except,
Maharashtra, AP and West Bengal. Infrastructure investments have picked up and
there is visible progress in several cities, notably, Delhi (NCR), Hyderabad and
Chennai. There is progress on more transparent land records and stamp duty
reduction and electronic administration of transfers, Bangalore and Hyderabad are
leading the change, while Delhi has done away with DDA's near monopoly on
development.
The same competing forces which forced state governments fromWest Bengal to AP
to covert the IT sector through proactive governance will ensure that the laggards will
play "catch up". (Note for our Mumbai Investors -You won't get your metro and other
infrastructure till the ULC is removed!!! so says the centre for funding the viability
gap!!)
The Global Investors have discovered Indian real estate and there is increased
investment activity in the market by International Investors across all categories of
Investments. The public markets have also seen a flurry of IPOs from Real Estate
companies. Cumulatively these companies have raised Rs 165 Billion from the public
market. The economy has been in very good shape and is expected to continue to
grow at8%plus.To put it in perspective at8%growth, the economy should double in
7 years. All of these are positive for Real Estate as an asset class.
To facilitate continued participation in the India Growth story and the opportunities
thrown up to various emerging sectors of the economy, the Kotak Alternate Assets
Group upped its stakes in the business recently with two new Funds, viz. Kotak
Alternate Opportunities (India) Fund for investments in the Real Estate sector and the
other for venture capital type investments in Intellectual Property driven businesses
such as Biotechnology. With these the cumulative Alternate Assets under
management at Kotak as on date stands at Rs.30,600 mn (approx USD 740 mn).
While we strive to achieve sizeable scale aligned to the opportunities presented by
The India Growth story, a disciplined investment strategy with stringent due diligence
processes and controls would be the key differentiators and success factors to
support scale on a sustained basis.
September 2007
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