Indian realty drives $14.01b PE investments from 2015 to 2018

V Nagarajan, Gulf Today

Singapore investors are betting big on Indian commercial real estate and other new sunshine sectors, including logistics and warehousing. Major Singapore-based private equity firms are funnelling billions of dollars into the country’s real estate sector, particularly in South Indian cities.

As per ANAROCK’s recent report Private Equity (PE) in Indian Real Estate, of the total $14.01 billion Private Equity funds into Indian realty between 2015 to 2018, approximatelyl 1/3rd were pumped in by Singapore-based firms alone during the period — the highest among both domestic and foreign investors. However, of the total PE inflow of $1.1 billion in Q1 2019, there were no investments from any of the Singapore-based PE investors such as GIC, Ascendas and Xander.

With funding from banks and NBFCs drying up over the last few years, Indian developers were being forced to explore debt and equity funding from various private equity players. Singapore investors were on top of the list, followed by PE players from US and Canada. After establishing a strong base in China, India was their logical next destination of preference.

In fact, with their more patient and long-term outlook, Singapore-based investors and developers have gained a substantial foothold in India’s property market over the last four years. In in 2015 and 2016, Singapore-based PE players pumped $ 1.15 billion into Indian real estate.

This saw a three-fold jump in 2017 and 2018 - to nearly $ 3.5 billion. Major players including GIC, Ascendas-Singbridge and Xander have been making steady investments into India. However, in recent years they have scaled up their investments and developments across segments. Besides commercial spaces including office and retail, players like Ascendas are also diversifying their portfolios and eyeing sunshine sectors like logistics and warehousing.

Q: I am planning to invest in commercial property to get periodical rental income. Is it advisable to obtain loan for such property? Are there tax advantages for borrowers? Please advise. Prakash Rangaraj, Sharjah.
It is advantageous for NRIs to invest with loan while seeking a fixed flow of income in India. This is because from the rental income received deduction is available for property tax and also 30 per cent towards repairs, maintenance and collection charges. This is irrespective of the fact whether you actually spend on repairs or not. There is also complete deduction on interest payment made towards loan without any upper limit.

The entire interest amount for purchase of property which is given on rent is allowed as a deduction from the rental income. Moreover, rental income is repatriable every year.

Q: My family has bought an old house using capital gains arising out of sale of land in Pune and demolished the structure. The new unit was built within three years after demolition. Are we entitled for capital gains exemption? Parivesh, Dubai.
Yes. There are decided cases which established availability of capital gains exemption where an assessee buys old house, demolishes and builds a new unit. This exemption is available under section 54F which clearly states that construction should be carried out within a period of three years from the date of sale of capital asset.

With effect from Assessment Year 2020-21, the Finance Act, 2019 has amended Section 54 to extend the benefit of exemption in respect of investment made in two residential house properties.

The exemption for investment made, by way of purchase or construction, in two residential house properties shall be available if the amount of long-term capital gains does not exceed Rs20 million.

If the assessee exercises this option, he shall not be entitled to exercise this option again for the same or any other assessment year.

Q:I am in the process of leasing my property in Delhi by entering into a lease agreement with the tenant. Is registration of the lease deed compulsory? Manish, Dubai.
The Transfer of Property Act makes a distinction between a lease requiring to be registered and those not requiring registration. However, a lease of immovable property from year to year or for any term exceeding one year or reserving a yearly rent has to be made by a registered document.

At the same time, a lease for duration of less than one year, if not accompanied by delivery or possession, does not require to be registered.

Though registration of a lease for a term not exceeding one year is optional, it is always in the interest of the parties to get it registered. Non-registration of a compulsorily registrable lease deed has several consequences.