The last 6 months the builder community has faced huge problems getting the necessary funds, since customers were not coming in, investors were shying away, banks were playing hardball, Mutual fund companies were reducing their exposure drastically & even FII’s have come in at a reduced trot.
However PEI (Private equity investments) in India’s real estate projects have actually grown by over 75% over the last year rising to $1,656 million in 2011, from $944.7 in the previous year.
The big difference however is that now, these PEs are not investing into the Equity market of the Realty companies, but in specific projects .
The risk factor is much lower, since 1) This is about a single project. So the risks are only project-level risks and hence lower.
2) Unlike Equity where there is very little control over the Realty company, here In the event there is problem, the PE themselves are able to be involved and try to resolve an embargo, so that the project is brought to a completion
Much of the money for realty players in 2011 came from domestic private equity funds in the form of high-yield debt with fixed returns but that carries lower risk,
Kotak Realty Fund, is supposed to have achieved an IRR (internal Rate of Return) of 32% from real estate projects.
Kotak Realty Fund and many other private equity players are now busy raising both domestic and foreign money to invest in real estate projects across the country.
We could see much more of this kind of funding in the near future – project specific !
(info source: economic times- adapted)
However PEI (Private equity investments) in India’s real estate projects have actually grown by over 75% over the last year rising to $1,656 million in 2011, from $944.7 in the previous year.
The big difference however is that now, these PEs are not investing into the Equity market of the Realty companies, but in specific projects .
The risk factor is much lower, since 1) This is about a single project. So the risks are only project-level risks and hence lower.
2) Unlike Equity where there is very little control over the Realty company, here In the event there is problem, the PE themselves are able to be involved and try to resolve an embargo, so that the project is brought to a completion
Much of the money for realty players in 2011 came from domestic private equity funds in the form of high-yield debt with fixed returns but that carries lower risk,
Kotak Realty Fund, is supposed to have achieved an IRR (internal Rate of Return) of 32% from real estate projects.
Kotak Realty Fund and many other private equity players are now busy raising both domestic and foreign money to invest in real estate projects across the country.
We could see much more of this kind of funding in the near future – project specific !
(info source: economic times- adapted)