With falling property prices, global private equity real estate funds are expected to open their wallets wide, reports CNBC-TV18.
Property prices have begun cooling again. Demand is slowing down, bank finance has dried up, and real estate IPOs do not seem set for a grand welcome on the equity markets. But the situation is not as grim as it sounds.Global real estate funds are lining up to enter Indian real estate.
Sanjay Dutt, Deputy MD, Cushman & Wakefield, said, “Our estimate is close to USD 1.5 billion have already been committed and going forward two to three billion dollars will be committed this year which is substantially higher.”
Most developers have tied up their capital in building land banks, and do not have funds to execute projects.
With bank debt no longer an option, developers are faced with a huge liquidity crunch. And desperation is setting in.
Aanandjit Sunderaj, CIO, India Property Fund, said, “Currently, we are in a sweet spot, as far as financing is concerned. Deals which were earlier looking very expensive to us are now looking doable because the developer is willing to wait to take his profit at a later stage.”
But it is not just demand from developers that is fuelling fund activity. Over the past two years, they have raised huge amounts of money from investors and now it is time to show returns.
Abhinandan Lodha, Director, Lodha Builders, “I personally know of three international funds who have together brought about USD 8-10 billion of capital to India which they have not been able to deploy as yet. These people are now under pressure to deploy funds because investors have started asking for their returns back.
Experts feel this is just the beginning.An even bigger wave of organised funding is expected when real estate mutual funds become a reality, and exit routes for these funds look clearer.
Source : Moneycontrol