Real estate private equity funds, which invested heavily in the Indian realty market in 2006-07, are seeing a large number of exits this year, and industry experts say the exits are only set to get bigger.
While 2010 saw the exit of only eight realty private equity funds, the January-March, 2011 period alone accounted for the exit of eleven real estate-focused private equity funds. Kotak Realty Fund made an exit worth $177 million in March when it divested Peepul Tree Properties, its information technology office park project to Tata Initiatives Fund I. Kotak’s realty fund has $850 million under its belt, which is segregated across three funds, including two domestic and one international fund.
V Hari Krishna, director, Kotak Realty Fund, said, “In the last one year, exits of $1.8-2 billion have already taken place and exits worth another $2 billion are lined up in the next 24 months. We do not have any major exits this year, but we would look at a couple of them. We have another $100-115 million left with us from our last fund, which we are also looking to deploy.”
Amit Goenka, national head (capital investments), Knight Frank India, said, “One of the largest exits from the realty space investments in 2006-07 is expected this year. Of the $2.5-3 billion invested through direct private equity during that year, half the sum is looking at immediate exits.”
Others, too, echoed Goenka. Shobhit Agarwal, co-head (capital markets), Jones lang LaSalle India, said, “Around $1.5 billion is looking at exits right now, and all these are nine-year horizon funds. Some players have managed returns of 20-25 per cent but the average has dropped to around 15-20 per cent, as some funds could not make good exits.”
Arun Natarajan, founder and CEO, Venture Intelligence, said, “Most funds had invested in 2006-2007 and after five years, these funds are looking at exit opportunities now. We already have evidence of exits happening, which indicate it is good time to sell. Also, there is pressure from investors to show returns which they were promised while raising the money. There were only eight exits in the last year and we have seen 11 in the last four months itself. These exits will happen by mid-next year.”
Though international private equity players had invested in big-ticket projects like townships and SEZs, currently, domestic funds are reaping the benefits, as they are allowed to invest in smaller projects. “All these foreign investment bank sponsored funds and sovereign wealth funds did large-ticket deals which are more difficult to exit than smaller ones. We haven’t noticed any exit deal from these foreign players yet,” said Natarajan.
In February, HDFC Venture fund, which invested Rs 210 crore in Bangalore-based Embassy Property Development’s project in 2006, made an exit of Rs 700 crore by selling their stake to the developer.
Big-ticket players like IndiaReit Fund, HDFC Venture Fund, Red Fort Capital and Kotak Realty Fund have made expected exits in the last quarter. However, some stand behind others in the queue.
