The PE investments in real
estate was recorded at $276 million (around Rs 1,638 crore) in first half of
2013 as compared to $514 million (around Rs 3,050 crore) in the same period
last year. The decline in the quantum of PERE investment was essentially due to
less number deals (13 in H1 2013) as the average ticket size of deals remained
same.
Consultancy firm Cushman and
Wakefield attributed the drop to the volatility in the market, including slower
growth of the Indian economy, political stalemates and depreciation of the
rupee. While, there is a strong investment sentiment for PERE transactions in
India, they display a reflection of the market sentiments, where funds are
looking at only embarking on projects with strong fundamentals.
Even though private equity
investment in the Indian real realty has fallen nearly 50 per cent to $276
million in the first half of 2013 due to lack of good projects and weak
sentiment, foreign investors are still bullish on the sector. PE funds continue
to show keen interest in the market with a number of deals in discussion.
“Investors are willing to invest
in real estate; however they are exploring the market for right real estate
projects. We anticipate that in the next few quarters, after some regulatory
and politico-economic environment are regularised, the momentum in real estate
will pick up throwing open more investible options for the investors,” said
Sanjay Dutt, Executive Managing Director of South Asia operations, C&W. He
added, currently, it was estimated that around $2 billion is ready to be
deployed in the real estate sector of the Indian market. The fund raising
environment (domestic and offshore) has consistently improved with more quality
capital available for the sponsors with demonstrated track record.
According to property consulting
firm Cushman and Wakefield about $2 billion (Rs 11,854 crore) is available with
private equity firms ready to be deployed in real estate in the next one year,
but PE funds want to put in money only in those projects with strong
fundamentals. According to Sanjay Dutt, despite the slowdown in the
construction market and the reduced number of investible projects in India,
real estate is still the fourth most-invested sector by private equity funds.
“We anticipate that in the next
few quarters, after some regulatory and politico-economic environment are
regularised, the momentum in real estate will pick up throwing open more
investible options for the investors,” he said.
So far in 2013, the highest
value PE investment was $131.6 million in Pune, followed by $67.5 million in
Mumbai, $38.8 million in the National Capital Region, and $16.9 million in
Bangalore.
Even data from Venture
Intelligence shows that private equity-Real Estate firms made 13 investments
(amounting to $318 million across 12 deals with disclosed values) during the
quarter ended June 2013. The volume of investments perked up significantly from
the seven investments in the same period in the previous year (which witnessed
$172 million being invested across six transactions with disclosed values) and
also the eight investments (worth $569 million) during the Jan-Mar 2013
quarter.
However, there is a strong
growing trend towards investments in ready office space. The growing stability
of the market is reflected by the continuous growth of the core investors
(number and value) with over $1.3 billion (Rs 7,705 crore) invested in ready
office space during the last three years.
Some recent marquee
deals/developments in PE investments:
• Pune witnessed transactions such as the Panchshil Realty
and Ireo Management Ltd SEZ by Blackstone for $75.9 million (Rs 4.5 billion).
• Ascendas Trust’s Rs 600 crore (about $110 million)
acquisition of 2 million sq. ft of office space in Hyderabad from Phoenix Group
was the largest investment during the second quarter of FY13. This was followed
by Xander’s Rs 280 crore ($52 million) investment in Supertech’s 125 acre
township project in Gurgaon and Clearwater Capital’s (along with Ajay Piramal
Group non-banking financial company PHL Finance) Rs 300 crore ($50.2 million)
investment to finance VGN Developers’ acquisition of a land parcel for a gated
community project in Chennai.
• In September ‘13, Kotak Real Estate fund said it had raised
$200 million (Rs 1,200 crore) from select group of investors and has firmed
commitments to raise $200 million more to close its $400 million eight-year
tenure fund to invest in only residential properties in India’s six
metros. The fund will invest an average
of $15-20 million in each project and will put in money from the first close in
10-12 projects. It is looking to generate a return of 20 percent for investors
of the new fund.
• PE Firm, Indian Property Advisors Pvt Ltd. (IPAL) is
planning two funds – a Rs 300 Cr domestic fund and $250 – 300 million offshore
fund, which would be raised in the second quarter of 2014. IPAL would be
investing in small redevelopment projects with a turnaround of three years and
will only fund for the growth capital.
The company plans to have plain
vanilla equity investment rather than a structured deal.
• Even Tata Realty has put its 780,000 sq ft IT park in Mumbai’s
Goregaon suburb on the block and aims to raise Rs 800 crore through the sale of
the park, while Oman’s State General Reserve Fund and the Government of
Singapore Investment Corp (GIC), investment firm Temasek committed to invest
$200 million in HDFC Real Estate Fund.
• DLF, India’s largest real estate company, had initiated
talks with four buyers, including leading private equity (PE) funds, for the
sale of Aman Resorts, its luxury hotels chain, said a source involved in the
deal. In December 2012, DLF had announced it had sold the entire stake in Aman
Resorts for $300 million to Adrian Zecha, the hotel chain’s founder. Sources
said Zecha had missed two payment deadlines in March and June, adding he wasn’t
able to raise funds for the deal. “Adrian is still in the fray. Being a
management buy-out, it is taking time to close. In the meantime, they (DLF) are
also in discussions with four other buyers, including some global PE funds that
are in various stages of evaluation and diligence,” the sources said. “They are
not banking on one buyer for the sale. That is why they’re talking to
three-four companies.”
• The real estate fund of Morgan Stanley has abandoned plans
to invest nearly $200 million (about Rs 1,240 crore) in an upcoming commercial
real estate project in Mumbai after the rupees recent plunge against the dollar
made the deal unrewarding, three people familiar with the development said.
Morgan Stanley Real Estate Fund was working on the structured finance deal with
Mumbai based Wadhwa Group since January to invest in the latter’s 1.6 million
square feet office project in Bandra-Kurla Complex. Construction on the
project, called ONE BKC, is due to be completed in the next 12-15 months. The
fund has invested about $780 million in Indian real estate so far and the
investment in ONE BKC would have been its first in a commercial property in
Mumbai. Returns that were arrived at in earlier negotiations between Morgan
Stanley and Wadhwa were shrinking even before concluding the deal, one of the
people quoted earlier said. The hedging cost for the entire deal would have
been huge. Morgan Stanley declined to comment, but Wadhwa Groups chief
financial officer Srinivasan Gopalan confirmed that the proposed deal has
fallen through. Wadhwa Group is now in process of raising domestic debt of over
Rs 1,100 crore from Standard Chartered Bank for the project.
(Sources: First Post 1st August
2;013, Economic Times-26-Sep-2013, Live Mint 19th Sep ’13, Business Standard
28th Sep ’13, 27th July ’13)
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