India:PE Players See Depressed Realty Market as a Big Play

Investments in the sector more than doubled to . 2,100 cr from a year ago

SOBIA KHAN BANGALORE 

Private equity investors continue to put their faith in India's real estate sector, despite a slowdown in home and office sales across cities. Property advisory firm Cushman & Wakefield said during the Jan-Mar 2012 quarter, PE investments in the sector more than doubled from . 1,060 crore a year ago to . 2,100 crore, and was 26% higher than . 1,670 crore the previous quarter. The average deal size in development projects also increased from . 80 crore in Q4 2011 to . 190 crore in Q1 2012. 
"Close to . 15,000 crore worth of private equity deals are in the pipeline today and are expected to be concluded over the next 12 months," says Sanjay Dutt, executive managing director, South Asia at Cushman & Wakefield. "There are many funds, independent investors and institutions, who are seeing the current depressed market as an opportunity, as valuations are very attractive." 
The opportunity is such that the first-quarter of the current financial year has seen five deals worth over . 1,500 crore being concluded by foreign investors. In 2012, around 80% of the investments in the sector came from foreign funds compared to just 50% in 2011. Some of the big-ticket transactions that were concluded during the quarter included . 464.6-crore investment by Morgan Stanley in Sheth Developers' group housing project, IL&FS Investment Managers' investment of . 200 crore in Indiabulls Infraestate and . 310-crore investment by Kotak Private Equity in Sunteck Realty. 
"There is shortage of capital in the market and there is opportunity to do interesting equity deals. We will focus on the residential segment for both equity and mezzanine transactions," says S Sriniwasan, CEO of Kotak Realty Fund, which plans to invest around . 100-150 crore in each project. The residential sector continued to be the preferred asset-class for investors due to relatively easier exit options. This segment saw the highest number of deals announced in Q1 2012, totaling to . 800 crore, followed by office and mix-used developments.