Adil Engineer, Jt. Managing Partner, Credberg

I believe, 2020 will emerge as a far better year in terms of performance than 2019.

Feb 02, 2020 02:02 IST India Infoline News Service

Adil Engineer
Adil Engineer, Jt. Managing Partner, Credberg, is a founding member of Credberg and serves as a Jt Managing Partner, based in Mumbai. Adil is responsible for Jointly leading the firms growth Strategy. He has more than 28 years of experience encompassing investment banking, investment management and construction. He has advised on deals in excess of US$ 4 billion across asset classes and the entire capital stack. Mr Engineer was previously a Partner at Brookfield Financial where he was instrumental in setting up the Indian operations. Prior to that, Mr Engineer worked as a Director with F&C REIT Asset Management where his role focused on investment management across the entire investment cycle. Prior to that Mr Engineer was a founding member of a medium sized construction firm in India. Mr Engineer earned a civil engineering degree from Mumbai University and a post graduate diploma in construction management from NICMAR. He is a past president and a current executive committee member of the Malabar Hill Club comprising of 5000 members in South Mumbai.
 
In an interview with Mamta Maity, indiainfoline.com, Adil Engineersaid, “I believe, 2020 will emerge as a far better year in terms of performance than 2019.
 
How has the realty sentiment been in 2019?
In my opinion, realty sentiment in 2019 has been extremely subdued and has gone through severe pain points with the liquidity crisis stepping in. In the past few months, the development in real estate sector in India has come to a point of stagnation due to shortage of funds in the market. Besides, due to the widely-implemented ban on the subvention schemes by the government of India, the demand for residential apartments is facing a drastic downfall, invariably affecting the market sentiments. Adding to that, residential real estate buyers across the country in many cases have been hit with home loan payments due to the default of builders on subvention schemes now banned by the government of India. The realty sentiment has overall been in a major slump in 2019.
 
Which categories, in your opinion, have been popular?
Evidently, office has been the most popular asset class of real estate in 2019. This is partly  because of subdued demand and low absorption of residential properties. Office has made a come back this year in a big way, so much so that it continues to be among top target asset class for realty investors. The demand for office spaces across the country saw a remarkable rise, setting high records of absorption. At present, even though we claim the economy to be shrinking drastically, there are still large number of takers for office spaces this year, which is quite contrarian. Hyderabad is leading the race in office space occupation amongst other cities. Clearly, office has emerged as a leader as far as the real estate asset classes are concerned.
 
Which area saw maximum inventory supply. Which budget category?
In terms of maximum inventory supply, the office category has seen some amazing inventory supply this year. However, if you consider the residential category, most of the inventory supply is coming into the mid-market segment or the affordable segment. This is so because the market seems to have identified its space, where products are being developed for specific target audiences, where the price range starts from 30 lakhs to maximum 60 lakhs in most cities and in the outskirts of Mumbai, are moving well. Besides, with better clarity offered on GST by the government, it is this segment that has been progressing well even for under construction inventory, especially since the GST rate on affordable housing has been lowered to 1%. This is evidently making a huge difference in demand for properties under construction.
 
What is the current unsold inventory in the city? Which markets have the maximum unsold stock and why?
From the industry perspective, markets or submarkets that have piled up the wrong stocks – one’s that are not in demand or with incorrect target audiences, are suffering the most with maximum inventories. To give a reference, in an area like Kandivali, that falls in the western suburbs of Mumbai, there is plenty of unsold stock – mainly larger apartments costing 2.5 crores and above, for which, the demand is mostly low or nil at present. This also raises concerns regarding the products as well as inventories, their quality, accessibility, and level of demand in such submarkets.
 
Do you think the market demand was in line with the expectations? Which quarters have performed well? What factors affected/influenced a change in demand?
With regard to performance, by and large the market has been subdued throughout 2019. I don’t think there was any specific quarter that witnessed massive demand and performed exceptionally well. Overall, the real estate market in 2019 was relatively flat as compared to years past.
 
Any new trend that the city witnessed in 2019?
Talking about Mumbai in specific, the new trend or development, as you may like to term it, has been the debut of co-living spaces. Looking at the cost of living and property rents, co-living spaces prove to be cost-efficient, especially for those living individually, and not with a family. In the last one year, most realtors who have identified this demand, are seriously looking at undertaking such projects at different locations surrounding commercial hubs, because that’s where the concept of co-living spaces are being looked at seriously. So, to sum it up, I think this has been the only new trend that the city has witnessed in 2019.
 
How the market is expected to be in 2020?
I believe, 2020 will emerge as a far better year in terms of performance than 2019. I’m optimistic that the regulations around distressed properties will be addressed and further clarity around the same will be given, which may then potentially enable the entrance of foreign capital into this segment. If this is implemented rightly, the market sentiment is certain to get back on track in the second half of 2020.
 
How is the scene regarding the distressed assets in India in 2019? How can they be mentioned? What’s the outlook for the same in 2020? Which asset class has the maximum distress currently?
My observation is that the distressed assets market has not clearly played out in 2019, predominantly because of two reasons: one, the regulatory space has not been reasonable in terms of financing under RERA and NCLT, and second, there have been less number of distressed loan holders in a position to give up on their loans at a heavy discount. These two things should potentially change in 2020, and the year 2020 can witness a wave of transformation followed by easing regulations. Besides this, the government policy which is likely to bring the proposed 25000 crore distress asset fund, will play an important role in elevating the distress seen in the residential development segment. Since 2019 proved to be a year of distress for the residential space, it has also left the most impact on the market sentiment and market equity, which can improve in 2020 if the issues faced are addressed with rational solutions in the first quarter of 2020. Capital has been raised and is available for distressed assets. What matters now is finding the right framework and right environment to direct this capital towards these distressed assets.

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