Analysts believe that they have
the potential to invest in real estate projects to evade risk in a sluggish
market and undertake some hefty transactions.
NEW DELHI: At a time when
the Indian banks are adopting a cautious approach for funding real estate projects,
Private Equity (PE) funds and Non-Banking Financial Companies (NBFCs) seems to
have come to the rescue of the Indian real estate market.
Analysts believe that they
have the potential to invest in real estate projects to evade risk in a
sluggish market and undertake some hefty transactions.
REIT or Real Estate
Investment Trust is one another instrument that is being streamlined by the
Government to finance Real Estate sector. REITs allows anyone to invest in
portfolios of large-scale properties the same way an individual may invest in
other industries - through the purchase of stock.
In the same way,
shareholders benefit by owning stocks in other corporations, the stockholders
of a REIT earn a share of the income produced through real estate investment -
without actually having to go out and buy or finance property.
As per the VCC Edge, the
financial research platform of VC Circle that tracks investments, "During
first nine months of 2015, PE funds invested about USD 2.4 billion in the real
estate sector, across 53 transactions, surpassing the full-year investments of
USD 2.1 billion in 2014 across 80 deals."
The numbers are encouraging
for this year too. This year too saw the PE investment in real estate rose to
40 percent year on year in the quarter of March 2016 at Rs. 3840 crore of which
48 percent or Rs. 1870 crore went into residential segment.
Not only PE funds but NBFCs
have also been aggressively lending to the real estate sector. However,
analysts believe that NBFCs prefer to invest in residential projects rather
than commercial units mainly because of lower risk and quick returns.
"It is all the more
important now to manage finance in real estate sector than ever before. After
the RERA bill has been passed, large amount of the sales proceeds will have to be
kept in escrow account. This will create a huge burden on raising capital for
purchase of land and repayment of loans if taken against it. Getting external
finance is the need of the day for real estate to flourish," said Chairman
National Real Estate Development Council (NAREDCO), Rajeev Talwar.
"The main reasons for
interest of NBFCs and PEs in lending to the real estate sector are that they
are expecting higher rates of interest, hard assets as collateral and hoping to
trap sales proceeds in escrow accounts," said President National Real
Estate Development Council (NAREDCO), Parveen Jain.
Throwing further light and
to bring out the importance of on the role of NBFCs and PEs in Indian real
estate sector and various other aspects, NAREDCO under the aegis of Ministry of
Housing and Urban Poverty Alleviation (HUPA), Government of India is organizing
the 13th National Convention and Exhibition on August 19-20, 2016 at Hotel Taj
Palace, Diplomatic Enclave in New Delhi.
The convention aims to offer a platform to present
distinctions between conceptions and strategies from eminent Banking
Institutions, Private Equity players, Real Estate and Developer fraternity and
also promises participation of personalities from the diverse fields such as
Politicians, Bureaucrats, Contractors, and Material Suppliers across the
Nation.
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