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Pvt Equity Funds to “Invest” in Real Estate through SPV
The private equity funds have largely become skeptical on making direct investments in Indian real estate sector.
The funds are nowadays preferring to invest in a special purpose vehicle (SPV) created for implementing 5-6 projects, says Rashesh Shah, CEO & managing director of Edelweiss Capital, which manages real estate investments of about Rs 250 crore. The company is known to be one of the fastest growing full-service investment banks in India. It has invested a part of the kitty in SPV projects in Western India.
Experts also favor making investments through SPV route as it offers a clear earning flow and there was no hype concerning land banks.
A number of leading banks including the prominent names of ICICI Ventures, HDFC, IL&FS Investment Managers, Kotak and foreign players such as Morgan Stanley, Citibank and others have made private equity investments in the sector.
In 2006, share prices of real estate companies had zoomed away in the wake of their land holdings. Shares of Unitech, India’s largest real-estate developer by market value, has jacked by 26,869 per cent in the past three years.
Stringent rules for real estate in India and the increasing rates have led the share prices to drop sharply in recent months. Unitech, Prasvnath Developers, Sobha Developers, Akruti Nirman and Ansal Properties & Infrastructure have lost 40-50 per cent in recent times.
All Indian developers such as Unitech, Hiranandani’s Hirco, Western Pioneer Properties, the Raheja group’s Ishaan Real Estate and Dev Developers have tapped the London Stock Exchange.
Indian real estate developer have taken five, six or seven of their major projects and offered investors a new company in London with a plethora of business prospects to make investments in those projects, comments Richard Smee of Ernst & Young on the trend set up by Indian developers by tapping the AIM in London.
News Published Under: FDI, Real Estate Developers | No Comments »