India was a top investment
destination in the mid to late 2000’s. Even after the Global meltdown of 2008
India has remained one of the top investment destination and it continues to
show a vast potential for foreign investment and foreign players. India has
become the fourth largest economy in the world and it has the second largest
GDP (Gross Domestic Product) among developing countries in terms of purchasing
power parity. By 2025 the Indian economy is projected to be about 60% of the
size of the US economy. It is being observed that the transformation into a
tripolar economy (US, China and India) will be complete by 2035.
Brief Background about Asset
Management:
Asset management is often used as
the synonym of investment management or post investment management. Asset
management has become a keyword for potential and enhancement of investor
value. Asset management has been further classifieds into different heads –
Investment Management, Wealth Management, Private Wealth Management, Fixed
Asset Management & IT Asset Management [Software Asset Management and
Hardware Asset Management]. Real Estate Investment Management is the
professional management of various asset backed investment (shares, bonds and
other securities) and assets (real estate) to meet specified investment goals
for the benefits of the investors in these companies or asset. Proper
investment management in real estate aims to meet investment goals for the
benefit of the investors. These investors may be individual investors –
referred to as private investors – who have built investment contracts with
fund managers, or institutional investors who may be pension fund corporations,
governments, educational establishments or insurance companies or such fund
managers who manage money on behalf of pension funds, sovereign funds etc a wide
range of source investing. Investment management services provide asset
allocation, financial statement analysis, stock selection, monitoring of
existing investments and plan implementation. In many cases, the fiduciary
responsibility is also on the Asset Manager.
Real Estate Investment
Management Industry:
The Industry has seen big boom
with easing out norms for foreign investments in India and government
regularizing the real estate sector. Running an investment management business
involves hiring professional managers, running individual assets and asset
classes research, dealing with marketing, settlement, preparation of reports
for clients, and internal auditing. The Investment Management involves deep
understanding of the nature of each investment and the nuances thereof.
Frequent and periodic update of market situations, regulatory changes, new
policy enhancements to help formulate new strategies for value enhancement. The
financial services firms providing Investment. Management services represent
investor interest on board of investee companies. The service providers also
ensure periodic and frequent monitoring of project progress about comparison of
budgets and actuals, avoidance of cost overruns and MIS and cognizance of any
difference w.r.t. budget. The Investment Management Service firms also provides
strategic advice about Exit Strategy formulation, advise on structure, promoter
buy backs, third party strategic sales, listings and IPOs, mergers et al to optimize
value of investors and shareholders; and Present all alternatives to the Invest
Companies board for taking informed decisions based on prevalent situations.
They ensure that investors interests are optimized without jeopardizing the
relations between the investors and the investees.
Potential of Real Estate Asset
Management Investment in India:
The Indian real estate sector has
been a major beneficiary of the strong
economic growth witnessed in India since the year 2000. The growth in the
sector, supported by series of reforms, has not only resulted in significant
residential and commercial real estate, but also complemented the development
of physical and social infrastructure of the country.
The liberal economic policies,
aimed at improving private participation and opening of economy to foreign
investments, adopted by the Indian Government has helped in capitalizing the
strong fundamentals of the Indian economy which include young population,
rising urbanization and a growing middle class population. It is seen that
since the year 2000, Indian GDP has quadrupled and is expected to become the
third largest economy worth USD 6.6 trillion by 2028.
The real estate sector which
opened its door to foreign investors in 2005, has witnessed an inflow of about
USD 10.5 billion, which is about 5 percent of the total FDI inflow since 2005.
Several notable global investors have invested and exited in India over last
decade. Several rounds of fund raising have been made and these investments
have yielded mixed returns.
However, with the coming of
foreign investments in the period commencing from 2007 to 2011 funds that have
invested in the Real estate have either made exit or are on the verge of exit
pressure. This has made the services of financial firms to come ahead and
provide hand holding to the foreign investors to smoothly exit the investment
or to protect & enhance investor’ s interest in case of funds which end of
tenure is still some years in the future.
The Indian real estate market is
expected to touch US$ 180 billion by 2020. The housing sector alone contributes
5-6 per cent to the country's Gross Domestic Product (GDP). In the period
FY2008-2020, the market size of this sector is expected to increase at a
Compound Annual Growth Rate (CAGR) of 11.2 per cent. Retail, hospitality and
commercial real estate are also growing significantly, providing the
much-needed infrastructure for India's growing needs.
The Indian real estate sector has
witnessed high growth in recent times (last 2 years) with the rise in demand
for office as well as residential spaces. Most recently Approximatly USD- 3-4
bn od dedicated foreign funds have been raised by various institutions. Once
deployed, across various real estate related sectors and assets these
investment will also need post investment monitoring and management, Creating more opportunities for asset
management firm to the add value.
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