Recent data suggests absorption (demand) volume in India’s top 7 cities has either been flat or declined over the past two quarters. The Mumbai region and Pune have reported sharp drops, while Gurgaon and Bangalore have shown flat-marginally negative growth.
While developers could hold prices firm in the near term due to stable balance sheet liquidity, we think this will only hurt demand as interest rate rises and higher property prices will curtail affordability.
Likely stringent measures by RBI towards the sector could curtail credit to the sector and hurt execution. Looking ahead, the risks of sticky inflation, further rise in interest rates and more stringent RBI policies imply further downside risk to demand. However, the Job market is looking really good and hence Developers should reduce their margins a little bit which will get the consumers back to their doors.
Tuesday, January 25, 2011
Monday, January 17, 2011
Private Equity in Indian Realty
After a weak 2009, private Equity Funding in Realty saw a pick-up in 2010. ~$1.5 b (~Rs68 b) was invested across 46 deals in the sector vs $749m across 23 deals in 2009. To put this in perspective of sector funding, $1.7b equity was raised through IPO/QIP route in CY10. Of the total PE pool.
Developers are increasingly approaching PE funds, likely due to lack of other options. As an after math of the bribe-for-loan scam, banks are tightening lending to real estate firms. Also, falling sales volumes and lack of appetite for equity raisings have worsened their case. Hence, more developers across India now are turning to PE funds.
Recent PE Deals Include - Parsvnath raised Rs1.0b by selling 49.9% stake in Ghaziabad project to SUN-Apollo India RE; 2) ASK's Property Fund is investing in two Pune Projects of Rs5.25b; 3) Red Fort Capital is looking to invest Rs1.5b in Ansal API’s “Esencia” township Gurgaon; 4) Kumar Urban may raise Rs1.1b by divesting stakes in five Mumbai and two Pune projects.
Developers are increasingly approaching PE funds, likely due to lack of other options. As an after math of the bribe-for-loan scam, banks are tightening lending to real estate firms. Also, falling sales volumes and lack of appetite for equity raisings have worsened their case. Hence, more developers across India now are turning to PE funds.
Recent PE Deals Include - Parsvnath raised Rs1.0b by selling 49.9% stake in Ghaziabad project to SUN-Apollo India RE; 2) ASK's Property Fund is investing in two Pune Projects of Rs5.25b; 3) Red Fort Capital is looking to invest Rs1.5b in Ansal API’s “Esencia” township Gurgaon; 4) Kumar Urban may raise Rs1.1b by divesting stakes in five Mumbai and two Pune projects.
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