Cyrus Mistry (left), who took over for legendary businessman Ratan Tata, offered this with regard to the investment climate there in India:

“The recent emphasis on policy clarity and a renewed thrust to economic reforms by the Government of India is encouraging. With a sustained focus on policy stability and implementation, I believe that India would continue to be an attractive investment destination.”

ata Housing Development Company Limited

Tata Group owns some 100 plus companies worldwide already including legendary auto maker Jaguar, and
It seems safe to assume at least some of this new investment will be earmarked for real estate, given the group’s past interest in the sector. The conglomerate has Tata Realty and Infrastructure Limited and Tata Housing Development Company Ltd., as well as several key investment arms in the real estate space.

Just last month Tata Housing announced the expansion of developments for affordable housing in India via “Smart Value Homes Limited forays into Bengaluru”, and high end real estate ventures have been in the news for Tata of late as well. On the demand side of the real estate equation in India, the New York Times reported last month on a coming construction boom fueled by the lack of appropriate real estate space for International brands like Walmart to expand into there. The point being, there is little quality commercial space in all India for stores to take up business in. New construction would seem a logical investment avenue for any conglomerate.

Tata has almost half a million employees worldwide, and one of the most valuable brands in the world. It remains to be seen what path the new CEO will blaze to extend the empire Ratan Tata created. Manufacturing to services and beyond, $8 billion almost seems like a puny sum when all Tata’s assets are weighed. Still, forward momentum is always positive news.

RBI raises repo rate twice what was expected

The massive selloff today stands to hurt key sectors of the India economy including; real estate, banking, auto and other capital goods sales, and in the long term – some believe, the overall recovery. Four key bank stocks, HDFC ,  HDFC , ICICI Bank, and  SBI lost a huge percentage of the total Sensex fall.
Already, the real estate sector is a buzz over a hike that will further exacerbate the situation there. Poor sales and high input costs have already dampened the property market of India, and RBI’s unexpected extra hike points will only make things worse. Pradeep Jain, Chairman of the Confederation of Real Estate Developers’ Association of India (CREDAI), told reporters:

“Unless steps are taken to improve supply system, this increase by RBI is going to have a minimal effect on inflation. While we were expecting a moderate hike of 25 bps, the 50 bps raise is going to dampen growth. This will make cost of funds expensive for both developers and buyers, coupled with constant increases in input costs, making the business environment very complex across industries.”

The bottom line here is, residential buyers are going to be hit hardest by these rate hikes. This is bad business where sales are concerned. The margin for smaller banks is going to be even worse, and cities where purchase rates and prices are highest will be hit hardest. Workers just able to float loans across India, will now be shut out. So, while RBI may recoup margin at one end, a massive loss overall could take place. RBI’s hike only makes sense if the overall market – mid to long term – recovers.

Lalit Kumar Jain (right),  National President CREDAI, pointed out that the needed housing development funding for the next few years there in India, exceeds $3.2 trillion dollars US. In effect, RBI’s move may have far more dramatic ramifications than even experts predict. This is a case of too much, too soon for many.

The Reserve Bank of India (RBI) has basically used a shotgun to kill the mosquito of inflation here. Now, asset quality may further detirorate  as sensitive sectors respond to this unexpected twist. Commercial real estate, for one, is particularly subject to over scrutiny and key quality issues.

Most Indian banks showed a decline in net interest margins in their June earnings statements, and this is one huge indicator of profitability for banks. RBI’s move would seem to be putting the squeeze on many banks and other lending institutions there. While most banks do not fear for the long term, almost all suggest the market will become compressed over the short term. We will have more as the news comes in.

We leave you with

Intelligence, innovation and insight - Jones Lang LaSalle - the edge

According to de Haust, lodging purchases will gain 15 percent to 20 percent this year, or about $30 billion. And this volume of sales will not only be reflected across Europe, but in the Middle East and Africa as well. Speaking at the International Hotel Investment Forum in Berlin, de Haast added this:

“In 2011 we will see more deals with what we describe as secondary type assets.”

While the executive admitted most deals last year occurred in the luxury sector, investors now seem poised to take even greater risks than before in what amounts to a vastly improving market. “Chinese insurance companies will buy Chinese hotels and Indian insurance companies will buy Indian hotels,” he said. Chicago based Jones Lang LaSalle, had $2.93 billion in revenue last year from just such speculative expertise, just so the reader knows. Colin Dyer, CEO of Jones Lang Lasalle, does not pick dinosaurs to fill these global positions.

Workspace Mobility as a component of productivity - where the industry is

And in other news from Jones Lang LaSalle, not only are some markets coming back strong, apparently the real estate industry in general is headed for something of  a paradigm shift, at least in the way professionals do business. According to a recent report by LaSalle, outsourcing real estate is about to go mainstream. Some 70% of global companies surveyed said they would likely adopt hybrid delivery models by the year 2014. As the players emerge from this economic crisis, most of them desire and revamping of the delivery model.

While portfolio growth is almost assured this year, CRE peeps will be under extreme pressure to find new strategies to reduce cost and increase margins. Outsourcing to what may be called “Samurai” experts and consultants, may be one way the industry can shift in the right direction. You can view the survey yourself via this (PDF).  The image (above), from that report, reveals how resondents felt about workspace mobility, just as an example of interest. We leave you with the latest report via Jones Lang LaSalle’s Youtube Channel, which talks about the company’s position.