Even though private equity investment in the Indian real realty has fallen nearly 50 percent to $276 million in the first half of 2013 due to lack of good projects and weak sentiment, foreign investors are still bullish on the sector.
According to property consulting firm Cushman and Wakefield about $2 billion (Rs 11,854 crore) is available with private equity firms ready to be deployed in real estate in the next one year, but PE funds want to put in money only in those projects with strong fundamentals.
“While the PE investments in real estate was recorded at $276 million (Rs 1,638 crore) in H1 2013, which is 46 percent lower when compared to first half of 2012 ($ 514 million/Rs 3,050 crore), the PE funds continue to show keen interest in the market with a number of deals in discussion,” C&W said in a statement.
According to C&W Executive Managing Director of South Asia operations Sanjay Dutt, despite the slowdown in the construction market and the reduced number of investible projects in India, real estate is still the fourth most-invested sector by private equity funds.
“We anticipate that in the next few quarters, after some regulatory and politico-economic environment are regularised, the momentum in real estate will pick up throwing open more investible options for the investors,” he said.
So far in 2013, the highest value PE investment was $131.6 million in Pune, followed by $67.5 million in Mumbai, $38.8 million in the National Capital Region, and $16.9 million in Bangalore.
Even data from Venture Intelligence shows that private equity-Real Estate firms made 13 investments (amounting to $318 million across 12 deals with disclosed values) during the quarter ended June 2013. The volume of investments perked up significantly from the seven investments in the same period in the previous year (which witnessed $172 million being invested across six transactions with disclosed values) and also the eight investments (worth $569 million) during the Jan-Mar 2013 quarter.)
Data provided by the firm shows that Ascendas Trust’s Rs 600 crore (about $110 million) acquisition of 2 million sq. ft of office space in Hyderabad from Phoenix Group was the largest investment during the second quarter of FY13. This was followed by Xander’s Rs 280 crore ($52 million) investment in Supertech’s 125 acre township project in Gurgaon and Clearwater Capital’s (along with Ajay Piramal Group non-banking financial company PHL Finance) Rs 300 crore ($50.2 million) investment to finance VGN Developers’ acquisition of a land parcel for a gated community project in Chennai.
Earlier this week, Kotak Real Estate fund said it had raised $200 million (Rs 1,200 crore) from select group of investors and has firmed commitments to raise $200 million more to close its $400 million eight-year tenure fund to invest in only residential properties in India’s six metros. The fund will invest an average of $15-20 million in each project and will put in money from the first close in 10-12 projects. It is looking to generate a return of 20 percent for investors of the new fund.
Even Tata Realty has put its 780,000 sq ft IT park in Mumbai’s Goregaon suburb on the block and aims to raise Rs 800 crore through the sale of the park, while Oman’s State General Reserve Fund and the Government of Singapore Investment Corp (GIC), investment firm Temasek committed to invest $200 million in HDFC Real Estate Fund.
