Realty IPOs to double every year: JP Morgan

Global investor JP Morgan has said initial public offerings (IPOs) in the Indian real estate sector could double every year.

“Fairly strong activity can be seen in the Indian listing market. We believe IPOs can double every year. In the offshore market, including Singapore Stock Exchange (SGX) and Alternative Investment Market of London Stock Exchange, investor appetite is there for good projects and income-producing assets. Four real estate investment trust (REIT)-type vehicles may list on the SGX in the near future, banking on the success of Ascendas India Trust,’’ said Anthony Ryan, managing director, head of Real Estate Investment Banking, JP Morgan Asia, in a video-conference from Singapore.

When the business expands, the need for a third-party capital arises and developers are tapping both public and private equity markets. So far, seven realty companies, including DLF, HDIL, Omaxe and IVR Prime, have tapped the capital market and nearly ten firms have lined up their IPO plans.

“Our estimates suggest that the public floats in the real estate sector could raise from $2.5 billion to $3 billion in the coming months,’’ Kaustubh Kulkarni, executive director, Real Estate Investment Banking, JP Morgan India, said.

He said private equity players had committed nearly $15 billion on Indian realty projects. Given the fact that most of them are seven-year vehicles, it would come to $2 billion to $3 billion every year.

“Nowadays, it is not unusual to see a single-ticket investment of $250 million to $300 million in realty projects. Two years ago, it was only $50 million to $100 million,” he said.

Ryan said like India, China used to have smaller realty IPOs of $100 million in the beginning. “Now the average market capitalisation of a Chinese realty company is nearly $3 billion,’’ Ryan said.