An apparent slowdown in the real estate sector is forcing PE (private equity) funds to rein in their exposure to the sector, with nearly 30 per cent of the deals now stuck over valuations. PE funds and analysts have become far more cautious in evaluating real estate investments in India. One of the analysts said that some of the funds are tightening norms for valuations after the slowdown and at least 30 per cent of the deals are taking a much longer time to go through because of valuation issues. Mr Ritesh Vora, who is a director (investments) for PE fund Saffron Asset Advisers told Business Line that as the residential projects are in a correction mode, PE funds are becoming more selective. “The evaluations are more rigorous than they were a year ago. We are being more selective than before,” Mr Vohra said. But the situation was not so tough for real estate companies earlier. With the stock market on a downslide, real estate companies deferred their IPO plans and turned to PE funds to raise money. According to ICICI Securities, during the last two years, around 60 funds raised $30 billion in assets to invest in Indian real estate.   more »

India’s real estate party may be cooling down rapidly. Global private equity firms say that they would rather invest in the US realty market than in the Indian one because US property prices have fallen so sharply that yields on investments there will be more attractive—without the hassle. Private equity firms made a beeline for India after the government allowed foreign direct investment in real estate in 2005. They were attracted by returns of 25-30%, but with home prices falling in the US, global private equity firms now believe it makes more sense to park their investments in that country. “Last year, Japan was a more attractive market to put money in. If you look at the US, we can now get an internal rate of return of 25% there, so why would anyone want to come to India?” asked a senior executive at an international financial services group, who did not wish to be named. Four out of six private equity funds Mint spoke to said they are no longer investing in India. They didn’t want to be identified. The US, reeling from a subprime lending crisis, is seeing the worst housing slump since the 1930s. The median price for a single-family home has dropped 7.7% in the first quarter of the year, the biggest decline in at least 29 years, as values tumbled in two out of every three US cities, according to the National Association of Realtors. Sales of single-family houses and condominiums also fell 22% to 4.95 million at an annualized pace, the slowest in a decade.   more »

ICICI VENTURE Fund Management Pvt Ltd, the private equity arm of India’s second largest bank, ICICI Bank, will raise as much as three billion dollars for an infrastructure and a real estate fund, reports Bloomberg. ICICI Venture will start the roadshows next week for a $1.5 billion fund, and may also look at raising a real estate fund of equal amount, ICICI Venture CEO Renuka Ramnath has been quoted as saying by Bloomberg. The proposed real estate fund will invest in residential and commercial projects in a dozen cities including New Delhi and Mumbai. Most of the funds will be raised from investors in the US, Europe, Japan, Canada and the Middle East. In September last year, Ramnath told Mint newspaper that it would raise $7.5 billion over three years for a variety of funds like real estate, hedge and mezzanine funds, besides a general PE fund. By the end of 2010, the firm plans to have over $10 billion capital under management.   more »