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News & Views on Indian Real Estate

Wednesday, May 21, 2008

PE funds shy away from realty sector

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. Marginal slowdown in the Indian economy, distressing conditions at home (for foreign players) and the dampening of investor confidence because of mortgage crisis in North America and Europe being some of the reasons for the PE funds to become cautious. 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. 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. With the stock market on a downslide, real estate companies deferred their IPO plans and turned to PE funds to raise money. 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. Because of the slowdown faced by the sector, the developers were witnessing more realistic valuations of their projects. As a result, PE funds are getting wider choices at attractive valuations than was the case earlier. Once the stock market returns to normal, “real estate companies might return to the market.”

Anonymous said...

That's a better for all the investors because if the saving will be invest in the Real estate mutual fund sector it will be give the good return after some time because after some time the Real estate will give good output in future.

Architectse said...

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