Real estate: fourth most invested sector by PE funds
The Indian real estate, with time has come of age in the last few years and ‘private equity investments’ is accountable for it. On the grounds of positive demographics, rapid urbanization and growing income levels, the Indian realty sector has encountered a number of takers, keen to step in with funds.
Housing in India still chips in 5-6% of the total GDP, in comparison to hospitality, retail and commercial sub sectors. With the advent of private equity investors (like Clearwater Capital, Temasek and Blackstone) in the Indian real estate, growth has become inevitable. With the government giving its nod to foreign players in 2005, the real estate sector of the nation, since then witnessed a major transformation.
Investment morphology
The demand for over-the-edge commercial and residential real estate in the country is proven and viable. The sector had been consistent in offering opportunities for capital appreciation and growth to the potential investors. According to experts, there are a number of strategies adhered by PE fund managers, some of which include:
- core plus investing
- opportunistic investing
- value added investing
- core investing
PE’s channel the Indian real estate
Even though the rate of private equity investment in the Indian realty sector has taken a dip by 50% and stood at USD 276 million in the 1H2013, in the absence of viable projects and week buyer sentiments, foreign investments still set the trend in the sector.
According to some property consultants, funds valuing USD 2 billion (Rs 11854 crore) are ready to use with the PE firms, to take real estate a notch higher. However, such firms want to invest money in projects which showcase strong fundamentals.
Property analysts further confirm that despite the lack of investible projects in the country and slowdown in the construction industry, real estate is still tagged as the ‘fourth-most invested’ sector by PE funds. Experts are of the notion that in the next few quarters with the regularising of political-economic environment, the real estate sector will again gain momentum and offer more lucrative options to investors.
