Realty PE funds fall sharply in H1FY14; tougher times ahead
If one looks at the first half of this calender year, private equity funds have invested just over Rs 1,600 crores in the real estate space. This is a sharp 46 percent lower than in the first half of 2012.
September 23, 2013 / 22:21 IST
A depreciating rupee may be good news for Non-Resident Indians (NRIs) looking to buy property in the country, but it is not helping cash-strapped developers who are banking on foreign funds. CNBC-TV18’s Manasvi Ghelani reports Private Equity (PE) funds are running out of patience.
Since the beginning of the year, the rupee has fallen over 14 percent and that's the biggest problem as far as the private equity funds are concerned because they are not getting a big-enough bang for their buck.Also read: Realty's 80:20 nothing but facelift to banned 90:10 schemeIf one looks at the first half of this calender year, private equity funds have invested just over Rs 1,600 crores in the real estate space. This is a sharp 46 percent lower than in the first half of 2012.The number of deals have also fallen in the same period. However, what is worse than a fall in investment is that many funds have actually began withdrawing their investments.Grade-A funds like DE Shaw, the Starwood Group, and the Wells Fargo group have gone one step further and shut down their Indian real estate arms completely.Additionally, sources have claimed the that players like Vornedo Realty Trust, Gulf House Finance and Westbrook are on the verge of doing the same.Experts say the rupee's recent weakness is the biggest culprit, though problems like low demand, high rates, soaring construction costs, and delayed approvals have also played their part.Sanjay Dutt, executive managing director-South Asia, Cushman & Wakefield says, “Global investments are more sensitive to rupee falling. Whatever return they make gets eroded/negative and they take home nothing.”But there is still hope that the domestic capital will keep the sector going, atleast for a little while.“While there have been many exits and many more planned exits in the next few months and quarters, USD 2.2 billion has been committed between January to August 2013 and many of them are pension funds, sovereign funds or repeat investors,” adds Dutt. But these are really nothing more than promises. Everyone agrees that unless the government wins a few rounds in its fight to stabilise the rupee; bring investors back; and revive the economy, the sector is in for some very tough quarters. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
