Year 2014: Real estate funding will shoot up
Funds, or rather absence of funds, has always topped the list of concerns for realty developers and builders in the past year. However, few policy decisions taken in 2013 are likely to shift the wind for the sector in the present year and smooth the way for some big ticket funding in 2014.
As per property consultants, certain policy decisions formulated in 2013 will pave the way for better funding for the developers in 2014. Property developers are likely to experience major investments in the real estate sector either via private equity or the Real Estate Investment Trust (REIT).
Role of REIT
REIT’s are expected to offer necessary impetus to the realty sector, for its growth and development. The need for REITs is much felt in the residential real estate sector, since it needs a major kick-start to record significant growth, to benefit the overall sector. Few developments which will aid in acquiring this objective of growth and development are:
- The Regulator Bill
- Land Acquisition Act
- REIT guidelines
Given the market reports, private equity funds like Tata Realty and Infrastructure, Xander, Kotak Realty Fund and Blackstone, etc. are preparing to float REIT in the nation, when the capital markets regulator issues its final guidelines.
REITs will offer an avenue to the property realtors to commercialise developed property and providing an exit avenue. Furthermore, it will offer necessary aid to the Indian real estate market, providing it with required liquidity. Taking into account the present economic slowdown, REITs are likely to inject fresh lease of life in the choppy real estate market.
Other sources
Although the flow of private equity funds in the country are low, they have not dried up. As per Cushman and Wakefield report, such funds have armed themselves with safeguards and are available to the amount of USD 2 billion, ready to be deployed in the realty sector, regardless of the fall in PE investments in the Q1 and Q2 2013.
Financing for land purchase, is another approach suggested by the real estate analysts. Land is an asset which cannot shift anywhere, hence, acquiring 50% finance for it can put the liquidity crunch of the builders at ease. The direction where the market is heading, added with new funding sources proposed by the government, 2014 is expected to be a turnaround year for the financial fortunes of the Indian real estate sector.
