Private equity funds and non-banking finance companies secured exits worth $633 million from their investments in the Indian real estate sector in the first nine months of 2015, an over sevenfold jump over the $84 million worth of exits in the year-ago period, according to data from Venture Intelligence.This has been the best year so far since 2012 when the sector saw exits worth $1,022 million in the nine months to September.
Much of the exits, however, have come by way of refinancing by builders, who are keen to replace high-cost funds with relatively lower cost ones in a scenario where providing exits from cash flows is still not possible due to slow home sales.
“Most of the exits to high yield debt have been through refinancing because of slow pace of residential sales. To meet payment obligations, developers have had to resort to refinancing. The availability of cheaper source of liquidity is making it easier,“ said Vik as Chimakurthy, director at Kotak Realty Fund. In a recent transaction, Piramal Fund Management and Clearwater Capital's NBFC, Altico Capi . 725 crore tal, agreed to invest ` in a project portfolio of Bengaluru-based Century Real Estate. A part of this will be used by the builder to provide Kotak Realty Fund an exit valued . 375 crore from its portfolio at ` of three projects. Kotak had invested ` . 170 crore in these projects in 2011.
Jasmeet Chhabra, managing partner, real estate-private equity at Religare Global Asset Management, said NBFCs are deploying money at 16-17% and this is being used by builders to retire earlier high-cost PE investments. “That's positive because the sector is getting eased in terms of cost burden,“ said Chhabra. Religare Global Asset Management is raising ` . 1,000 crore to invest in the real estate sector.
“This is not growth capital. The market undercurrent is still negative,“ said Anckur Srivasttava, chairman of GenReal Property Advisers. “Builders are trying to refinance with some top up money to survive.“
With interest rates falling in the last few months, there is a greater incentive today for refinance. “There might be project delays, the overall risk in these projects is much lower today as they are at an advan ced stage,“ said Srivasttava.
In September, Gurgaonbased builder Orris Infrastructure raised ` . 325 crore from non-banking finance company IndoStar Capital.A part of this money was used by the builder to prepay `. 200 crore to Xander and . 65 crore to Religare, both of ` which had put in high-cost money earlier.
The CEO of a real estate private equity fund said more than 50% investment proposals his fund is receiving now are aimed at providing an exit to earlier investors. “This works well for all stakeholders. Buyers are fine as the project continues to move, existing investor gets an exit, we get to deploy capital and the developer can lower the overall project cost,“ he said, asking not to be named
Much of the exits, however, have come by way of refinancing by builders, who are keen to replace high-cost funds with relatively lower cost ones in a scenario where providing exits from cash flows is still not possible due to slow home sales.
“Most of the exits to high yield debt have been through refinancing because of slow pace of residential sales. To meet payment obligations, developers have had to resort to refinancing. The availability of cheaper source of liquidity is making it easier,“ said Vik as Chimakurthy, director at Kotak Realty Fund. In a recent transaction, Piramal Fund Management and Clearwater Capital's NBFC, Altico Capi . 725 crore tal, agreed to invest ` in a project portfolio of Bengaluru-based Century Real Estate. A part of this will be used by the builder to provide Kotak Realty Fund an exit valued . 375 crore from its portfolio at ` of three projects. Kotak had invested ` . 170 crore in these projects in 2011.
Jasmeet Chhabra, managing partner, real estate-private equity at Religare Global Asset Management, said NBFCs are deploying money at 16-17% and this is being used by builders to retire earlier high-cost PE investments. “That's positive because the sector is getting eased in terms of cost burden,“ said Chhabra. Religare Global Asset Management is raising ` . 1,000 crore to invest in the real estate sector.
“This is not growth capital. The market undercurrent is still negative,“ said Anckur Srivasttava, chairman of GenReal Property Advisers. “Builders are trying to refinance with some top up money to survive.“
With interest rates falling in the last few months, there is a greater incentive today for refinance. “There might be project delays, the overall risk in these projects is much lower today as they are at an advan ced stage,“ said Srivasttava.
In September, Gurgaonbased builder Orris Infrastructure raised ` . 325 crore from non-banking finance company IndoStar Capital.A part of this money was used by the builder to prepay `. 200 crore to Xander and . 65 crore to Religare, both of ` which had put in high-cost money earlier.
The CEO of a real estate private equity fund said more than 50% investment proposals his fund is receiving now are aimed at providing an exit to earlier investors. “This works well for all stakeholders. Buyers are fine as the project continues to move, existing investor gets an exit, we get to deploy capital and the developer can lower the overall project cost,“ he said, asking not to be named
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