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Global private equity powerhouse The Carlyle Group is understood to be looking to increase its stake in Value & Budget Housing Corporation (VBHC), the budget housing venture promoted by technology entrepreneur Jaithirth (Jerry) Rao.
Started in 2008 by Jerry Rao, after selling Mphasis, the software export services firm he founded to global technology major EDS, VBHC is understood to be in the process of raising close to Rs 70 crore. Carlyle, which has picked up close to a 20 per cent stake in VBHC in late 2011 for an investment of around Rs 100 crore, is understood to be close to investing further in the fresh round as well.
Jerry Rao did confirm to Business Standard that they are in the process of a fresh round to raise funds and they will have clarity on the investors by the end of next week. VBHC has a presence across Bangalore, Chennai, Mumbai, NCR and Rajasthan, with eight projects and is understood to have delivered under 2,000 units so far in the price range of Rs 5-15 lakh.
Jerry Rao, along with his former Citibank colleague P S Jayakumar, launched this project with a vision to build 1 million affordable entry-level home over 10 years across urban India. VBHC has been setting up a network of integrated housing projects nationwide by applying industrial engineering and construction technology to improve the construction process and build scale through standardisation.
This likely move by Carlyle to repose faith in VBHC comes at a time when the real estate market in India saw a decline of 12 per cent last year in terms of launches and more so when the launch of affordable housing units declined 25 per cent. According to a report by international property consultants Cushman & Wakefield, in the present economic scenario, both buyers and developers are taking a cautious approach not only towards residential real estate, but across all asset classes of real estate.
Despite the weakness, private equity investments in real estate during 2013 recorded an inflow of Rs 7,000 crore ($1.2 billion), an increase of 13 per cent compared to 2012 levels of Rs 6,200 crore or $1.1 billion. Cushman & Wakefield said that the increase in private equity inflows was primarily due to rising investments in residential assets and other sectors like retail and hospitality.
“While the number of deals has increased to 40 in 2013 compared to 34 in 2012, the average deal size has declined marginally and was approximately Rs 175 crore ($28 million). Given the difficult economic conditions, developers are finding it increasingly difficult to raise capital through traditional sources and are opting for alternate sources,” the report noted.
