Private equity (PE) and venture capital (VC) investments in the country's real estate sector rose 56 per cent between January and October to $1,338 million (Rs 7,490 crore) from $853 million (Rs 3,924 crore) in this period last year.
According to sector experts, as the demand for housing is increasing, PE investors are interested and expect 20-25 per cent after-tax returns.
Chennai-based Venture Intelligence, which compiled the data, says the number of deals concluded during the period was 35, compared to 28 last year. Some major investments included Brahma Management’s $145 million infusion in Brahma City Land Parcel in September and a $140 mn in Gurgaon Land Parcel in May.
In July, Indiareit invested $130 mn in SoBO Central. IL&FS-Milestone Group put $125 mn investment in HCC Realty’s HCC Park in June and HDFC Venture put $106 mn in the Lodha Group’s World One Residential Building in August.
Anuj Puri, chairman and country head, Jones Lang LaSalle India, said “With the return of confidence in the sector, real estate players are again looking at PE funding. That said, the industry still depends heavily on bank debt, NBFCs and end-user advances. Bank debt is a cheaper option and also offers flexible tenures. More, it is easily available domestically. NBFC funding is also available at cheaper rates and can be repaid early. This makes it more flexible. Finally, end-user advances represent interest-free finance.”
PE investors, he said, now had the same expectations as before the downturn. However, the structure has changed, as PE funds are now focusing more on capital protection. Or, they seek lower risk, even if that means slightly lower returns.