Mumbai: Private equity investment in real estate sector, which is finding fund raising difficult in the wake of bearish capital market and tighter money supply, may go up by 15-20% this fiscal compared to their funding last year, an industry leader has said.
“Private equity players have been investing in India’s real estate space since 2005. The sector received $2 billion private equity investment in 2005 which went up to $4.5 billion the next year and to a whopping $11 billion in 2007. This year, it should go up by 15-20%,” financial services firm Jones Lang LaSalle Meghraj’s Chairman and Country Head Anuj Puri told PTI.
There are mainly three preferred routes for developers to ensure funds for their projects — raising funds from capital markets, pre-sales funds from prospective buyers and loans and advances from banks and financial institutions.
“All of these are going through a rough patch which has paved the way for private equity investments in the country’s real estate space,” Puri said.
Raising funds from the capital market has almost come to a standstill since the market has been bearish for quite some time.
With banks and financial institutions tightening lending, following higher inflation and cost of funds, developers are finding it increasingly difficult to mobilise funds for their projects.
Private equity players, mainly from Europe and the US, are grabbing the opportunity with both hands. However, they are not keen on short-term play and they tend to stay put for five-seven years in a project, eyeing an assured return of 20-25%, Puri said.
Private equity players, however, are biased towards mid-level and larger companies since small firms lack in corporate governance, which is a pre-condition for being in the good book of private equity players.
Puri said that not only in the current fisacl but also in the coming years the year-on-year growth of private equity investment in real estate sector would be in the range of 15-20%.