Realty funds are back in business

Chennai

The global financial crisis has put the private equity players on a cautious path. However, Indian success story continues to remain intact and drives PE players to its fold. As demand picks up, realty projects that are put on hold are likely to be resumed to meet the pent-up demand in many cities.

There is no denying that expectations of PE funds have gone up and the valuations are becoming stringent now. It is quite natural that more efforts are being made to evaluate the business rationale behind new investment activity.

All said and done, with the liquidity crunch posing formidable challenges to the realty sector, most of the doors in the banking sector are either shut or norms have become more stringent. Mid-term capital requirement will have to be met by PE players, according to industry sources.

In Chennai, PE funds have made an investment of US$76 million in two projects. Though the numbers of deals have reduced to half when compared to last year, the quantum of investment has gone up from US$125 million to US$154 million, according to Venture Intelligence sources.

Though the current liquidity scenario is causing concern among property developers, it is time to seek PE funds to tide over the current scenario and put efforts to meet the mismatch in housing between demand and supply in Chennai. The growing potential for housing sector need not be overstressed and PE fund houses are expected to focus on such sectors in the coming years.

“There is no dearth of PE funds available today but the only criteria in the current scenario is that the project should be viable with a thrust on marketing and demarcation of exit route for investors”, feel developers who have been approached by various PE funds to forge strategic alliance in residential development.

Most of the funds are keen to commit for residential development only taking into account the surge in demand for select categories of housing due to demand-supply mismatch in the city.

On the flip side, land prices are deterrents and some of the projects are becoming unviable to undertake development by property developers even if PE funds are keen to commit for financing the project, according to industry sources monitoring the investment by PE funds in real estate deals in the city.

Source: http://content.magicbricks.com/realty-funds-are-back-in-business