PE funds shy away from real estate sector

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Bangalore: Private Equity (PE) funds are making a cautious retreat from the real estate sector thanks to an apparent slowdown in the sector. Nearly 30 percent of the deals are already stuck over valuations, reported Business Line. 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 hence at least 30 percent of the deals are taking a longer time to go through. Ritesh Vora, Director (investments) for PE fund Saffron Asset Advisers, said PE funds are becoming more selective as the residential projects are in a correction mode. "The evaluations are more rigorous than they were a year ago. We are being more selective than before," Vohra said. But the situation was not so tough for real estate companies earlier. Even the stock market's down-slide did not affect them, as they 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. "The returns have been as high as between 25-30 per cent on an annualised basis, which kept PE funds to continue investing in the sector," Vohra said. In developed countries, returns for similar investments are between a mere 3 and 4 percent. The real estate services company Cushman & Wakefield's Joint Managing Director, Anurag Mathur, pointed out that some of the PE funds, particularly foreign funds, are taking a more cautious approach. "Funds are now more selective and wary of the delivery timelines, costs, quality as well as performance of projects," he added.
Source: IANS
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