Tag Archives: Realty funds

Guinea pigs in the funding market-I

Posted on by Track2Realty

india realty news, india real estate news, real estate news india, realty news india, india property news, property news india, india news, property news, real estate news, India Property, Delhi NCR real estate, Mumbai Real Estate, Bangalore Real Estate, Pune Real Estate news, Realty funds, Kotak Realty fundTrack2Realty Exclusive: The realty market has been pretty exposed to the greedy investors and vulture funding, not venture funding. In desperation the developers often lost track of what kind of funding was required and met with the disaster. Amidst the cyclic very high and very low there has been off balance debt-equity ratio as well. Of late, some developers tried within the box and some outside it. The needs and solutions are different for listed and unlisted companies. Still the sector is in search of right funding mechanism and as Track2Realty finds, are guinea pigs in the funding market.

Real estate has tried all possible channels of funding yet failed to evolve a tried and tested formula that could worked across the sector. Bank financing, IPO, Private Equity, Mutual Funds, QIP, REIT, ECB….the realty market has often been exposed to the lenders with all their collaterals, but poor execution, trust deficit and overall macro-economic outlook has deserted the lenders from the sector.

While some analysts believe realty has actually been guinea pigs of funding market, others boast of that real estate (due to funding gap, of course) has been most innovative also in terms of raising money. With capital market pretty hostile, PE funds exiting and banks reluctant, it seems neither the innovative mechanism nor the promising pipeline visibility will bring funding to the cash starved sector in the days to come.

Sachin Sandhir, Managing Director-South Asia of RICS, however, blames the Indian developers who traditionally opted for illiquid, opaque and conservative sources of financing, unlike counterparts in the more developed markets where activities in the built environment are seen as potential avenues for investment. Given that construction and real estate are capital-intensive sectors, they require ample capital to sustain activities.

Therefore, while traditional bank lending has been the biggest financer of real estate activity, the liquidity crunch brought on by the global economic slowdown, resulted in the sector exploring newer and more innovative techniques of raising capital as a consequence of banks and financial institutions adopting a cautious approach to lending to real estate.

“Policy changes have resulted in foreign investors, driven by the need to increase returns through expanded investment opportunities and a desire to diversify investing in the Indian property market. Also, over the past few years, private equity players have been very active in the sector, especially in the housing segment. The Qualified Institutional Placements (QIP) route offered a cost-efficient way of raising funds from domestic institutional investors, offering an attractive alternative when overseas borrowings were drying up at the peak of the market slowdown. Recently we have also seen several developers raising capital through IPOs, convertible bonds, pre-sales and subvention schemes amongst others,” says Sandhir.

…..to be continued

PE players increasing focus on residential realty deals

Posted on by Track2Realty

india realty news, india real estate news, real estate news india, realty news india, india property news, property news india, india news, property news, real estate news, India Property, Delhi NCR real estate, Mumbai Real Estate, Bangalore Real Estate, Pune Real Estate news, Realty funds, Kotak Realty fundTrack2Realty-Agencies: Demand & supply mismatch is proving to be the burden for developers now, at least in the funding market. Most of the PE deals in the year so far has fallen into residential projects. PE players are investing in projects for shorter duration and with better cash flows.

So, while developers may like to hold on to the price, the PE investor may wish to exit even at slightly lower returns in stipulated time.

“PE players are very cautious while investing in real estate  and prefer shorter investment cycles. They are investing only in projects with guaranteed cash flows and all approvals in place,” Avinash Gupta, Head, financial advisory, Deloitte India was quoted by Hindustan Times.

According to a report by Jones Lang Lasalle India, of the total PE investment in the real estate sector in the first half of 2012, 50% was invested in residential real estate. This, in 2011, was 24% and only 17% in 2007.

Industry experts say many PE players who had invested in 2007-08 boom are unable to exit.

Most of the exits that have happened in the past two years have been secondary exits where either another PE player or real estate developer has bought back the stake.

In the past two years, PE players have also stopped taking risks and are sticking to metros rather than venturing into smaller cities.

While many realty players have been turning to PE players and offering better returns, up to 30% annual in some cases, they deny possible price cuts.

“Despite inflation and cash crunch, we have started to witness good sales. So, in the next year, there could be a price rise by around 15%,” said a Mumbai based realtor who had bought a PE’s stake in a project.

Kotak Realty fund raises Rs. 523 crore

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india realty news, india real estate news, real estate news india, realty news india, india property news, property news india, india news, property news, real estate news, India Property, Delhi NCR real estate, Mumbai Real Estate, Bangalore Real Estate, Pune Real Estate news, Realty funds, Kotak Realty fundKotak Realty Fund, owned by India’s fifth largest private sector lender by revenue, raised Rs.523 crore to lend to real estate developers with an assured return.

“It is a high inflationary environment and we are sure to get equity-like returns on debt-like risks,” says Vikas Chimakurthy, Director at Kotak Realty Fund, which manages Rs.3,500 crore. Real estate developers are under stress as lenders have turn stringent.

Kotak has raised money from its existing investors. “Our investors are satisfied with the returns and hence agreed to invest in the debt fund which they preferred more over equity,” Chimakurthy said.

“A better track record supported by a large wealth management portfolio helped Kotak to raise money in a tough market,” says a fund manager, adding, “Debt with an assured return offer anywhere between 20 to 21% returns, better than equity.” Private equity investors invested $784 m in real estate projects between January and September, 2011, 4% lower than in the same period previous year at Rs.4,248 crore, VCCircle, data provider showed.

The primary focus of the fund will be on residential projects, it said in a statement.

“Not many Indian or global PE funds are interested in investing in the Indian real estate sector. Since the competition is less, we find a good opportunity to invest here,” Chimakurthy of Kotak Realty Fund said.

“The financing constraints facing the real estate sector will help provide the funds with attractive investment opportunities and we expect deal flow activity to remain robust,” said Vikas Chimakurthy, director at Kotak Realty Fund.

Kotak Realty Funds to raise 600 cr via 4th realty fund

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Realty funds, Kotak Realty fund, Delhi NCR real estate, Bangalore Real Estate, JLLM, Jones Lang LaSalle Meghraj, Track2Media, Track2Realty, ravi sinha, india realty news, india real estate news, real estate news india, realty news india, india property news, property news india, ndtv.com, ndtv, aajtak, zee news, india news, property news, real estate news, 99acres.com, 99 acres, indianrealtynews.com, Mumbai Real Estate, India PropertyKotak Realty Funds Group, the PE arm of Kotak Bank, is aiming to raise Rs.600 crore through its fourth realty fund to be launched in the next few days. The fund will be mopped up from domestic market and invest predominantly in residential properties across India. It will have a green-shoe option of Rs.100 crore.

“We will launch our fourth fund soon. Some of our first fund investors who received the entire principal in addition to over 20% return have already shown interest in participating in this new fund. We should be able to conclude this fund raising within the next few weeks, that is early June,” said S Sriniwasan, CEO of Kotak Realty Fund.

Kotak Realty has a total $750 million worth of assets under advisory through three funds, including $331 million Kotak Alternate Opportunities India Fund and an offshore fund of $265 million.

Its first fund, Kotak India Real Estate Fund I, launched in February 2006, with its total corpus of Rs.457 crore has been completely deployed with other notable investments such as Lemon Tree Hotels, Pride Hotels, 3C Green Boulevard and Clover Golf community. Earlier this year, it returned the entire principle of this first fund in addition to over 20% returns to investors.

Kotak is raising the new fund after almost three years of launching its last fund – an offshore fund worth $265 million. A majority of this off-shore fund has also been deployed, and Kotak is in talks with some developers to invest the balance money in residential properties, primarily in Delhi-National Capital Region.