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Fund Raising becomes Costlier for Realty Companies
RAISING funds is becoming increasingly costlier for real estate players, as private equity players try and extract their own pound of flesh given the poor market conditions, says DLF chairman K P Singh.
“The cost of raising funds has gone up from what it was six months ago,” K P Singh told media, adding that real estate firms faced a tight situation. Several real estate firms, including DLF, Unitech, Indiabulls and Omaxe, have put off their plans to raise funds through capital market due to a global market meltdown. The listing of DLF Assets (DAL), a firm owned by the promoters of DLF, as a real estate investment trust (REIT) in Singapore has also been postponed. DAL is now raising funds worth Rs 2,000 crore through private placement.
“One would like to go for an IPO to raise funds. But since the market sentiment is not good, one has to opt for private placement,’’ says Mr. Singh, adding that Singapore listing will happen ‘once market sentiments improve.” DAL has been in talks with several global funds for the private placement.
“For a good company, raising funds through private placement is not very difficult. But it has become expensive as the investor takes his pound of flesh,” he said, indicating that recent meltdown has put private equity or other institutional investors at an advantage. In the given scenario, Mr. Singh said, one could expect more PE deals in real estate, but that would depend on “how desperate people are for funds.”
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