Real estate may See a Huge Rise in Private Equity Players
May 19, 2017 Real Estate News
With the implantation of Real Estate (Regulation and Authority) Act (RERA), demonetization, Goods and Service Tax (GST), it is expected that the institutional investment in India will see a huge rise. Private equity players who preferred to invest India by taking the structural – debt route, will find the Indian market more transparent and attractive.
This will lead to the country’s economy more aligned to the global compliance standard and more Foreign Direct Investment (FDI) is expected to make it easier for the foreign investors. 2009 saw the epic rise in the equity investment in the real estate sector by 60 percent, but it has gone down to 10 percent in 2016.
Since the real estate in India is experiencing a slow down, this is expected to set a very strong foundation for the long term goal. Equity investment in such times can prove to be very beneficial in ling term.
In the long run, the involvement of private equity in real estate will change. Times have changed and so has the practice of evaluating security values based on projected capital rates and cash flow to take a secured debt position. Developers are refraining from the high cost debt and therefore taking these debt positions is very risky.
The private equity fund investors will have to increase their debt appetite as the pure debt opportunity might not be available with the renowned brands. It is a better move to take up the structured position or pure equity position for the higher returns.
High returns are associated with high risks and therefore, a keen observation of the market movements and a proper discussion with the team is advised. Assets management companies will have to be more updated with the micro markets, project development, and statutory aspect in particular.
The trend of debt continued and in some cases even increased in 2016, in the real estate sector. Developers are trying to open leverage points to lure in more equity investors.
The stabilised implementation of RERA will help in building more trust between the investor and builder. This will increase the credibility of the developers and incur more cash flow in the sector.
The equity money will return back to the market but it is a challenge to the builders to find the right investors for the higher returns. It is expected that there will be a high demand for liquidity as the sales in the real estate sector has slowed down considerably.
This will lead to the country’s economy more aligned to the global compliance standard and more Foreign Direct Investment (FDI) is expected to make it easier for the foreign investors. 2009 saw the epic rise in the equity investment in the real estate sector by 60 percent, but it has gone down to 10 percent in 2016.
Since the real estate in India is experiencing a slow down, this is expected to set a very strong foundation for the long term goal. Equity investment in such times can prove to be very beneficial in ling term.
In the long run, the involvement of private equity in real estate will change. Times have changed and so has the practice of evaluating security values based on projected capital rates and cash flow to take a secured debt position. Developers are refraining from the high cost debt and therefore taking these debt positions is very risky.
The private equity fund investors will have to increase their debt appetite as the pure debt opportunity might not be available with the renowned brands. It is a better move to take up the structured position or pure equity position for the higher returns.
High returns are associated with high risks and therefore, a keen observation of the market movements and a proper discussion with the team is advised. Assets management companies will have to be more updated with the micro markets, project development, and statutory aspect in particular.
The trend of debt continued and in some cases even increased in 2016, in the real estate sector. Developers are trying to open leverage points to lure in more equity investors.
The stabilised implementation of RERA will help in building more trust between the investor and builder. This will increase the credibility of the developers and incur more cash flow in the sector.
The equity money will return back to the market but it is a challenge to the builders to find the right investors for the higher returns. It is expected that there will be a high demand for liquidity as the sales in the real estate sector has slowed down considerably.
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