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Industry Reaction to Morgan Stanley investment in city Realty Firm


Industry Reaction to Morgan Stanley investment in city Realty Firm

Last updated: January 19 2007
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  • Industry Reaction to Morgan Stanley investment in city Realty Firm

    Property developers and consultants have come up with mixed reactions to Morgan Stanley Real Estate announcing an investment of Rs 675 crore (around $152 million) in Oberoi Constructions, the biggest FDI in a real estate company in India till date.

    According to Joy Sanyal, vice president-urban development, TrammellCrow Meghraj, “The funding of Foreign Institutional Investors (FIIs) directly in real estate companies will lower the return on investment (ROI) of builders by about 8-10 percent as the supply of properties will now increase tremendously in comparison to demand. In fact, real estate companies were earlier gaining a high ROI.”

    Shapoorji Pallonji group is understood to be currently talking to various FIIs in order to raise funds for the infrastructure projects. When contacted, Amit Thakkar, director, SD Corp, part of Shapoorji Pallonji group says, “Although FIIs are expected to bring about transparency and superior development in the real estate market, the funding will have marginal impact on the pricing. This is because, consumers will find two builders quoting different sale price of property in the same area due to difference in quality of development.”

    However, Vinod Rohera, director-marketing, K Raheja Corp opines that FIIs should look at buying real estate projects at correct valuations through due diligence at a realistic market value. Otherwise, the sale price of properties owned by a particular developer will exceed as compared to other developers who are not raising funds from FIIs. Says Hemant Shah, chairman, Aakruti Nirman, “FIIs will bring an equity in larger projects where the biggest entertainment centres, on the lines of Disney malls in the US, will come up in India too. Hence, it becomes imperative for FIIs and builders to stick to their promises of meeting up with the deadline of completing projects. Moreover, FIIs investment should be able to mature the real estate market and we feel that the market will continue to grow at the rate of 25-30 percent.”
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