At a time when the Indian banks are adopting a cautious approach for funding real estate projects, Private Equity (PE) funds and Non-Banking Financial Companies (NBFCs) seems to have come to the rescue of the Indian real estate market. Analysts believe that they have the potential to invest in real estate projects to evade risk in a sluggish market and undertake some hefty transactions.
REIT or Real Estate Investment Trust is one another instrument that is being streamlined by the Government to finance Real Estate sector. REITs allows anyone to invest in portfolios of large-scale properties the same way an individual may invest in other industries – through the purchase of stock. In the same way, shareholders benefit by owning stocks in other corporations, the stockholders of a REIT earn a share of the income produced through real estate investment – without actually having to go out and buy or finance property.
As per the VCCEdge, the financial research platform of VCCircle that tracks investments, “During first nine months of 2015, PE funds invested about $2.4 billion in the real estate sector, across 53 transactions, surpassing the full-year investments of $2.1 billion in 2014 across 80 deals.” The numbers are encouraging for this year too. This year too saw the PE investment in real estate rose to 40% year on year in the quarter of March 2016@ Rs. 3840 cr of which 48% or Rs. 1870 cr. went into residential segment.
Not only PE funds but NBFCs have also been aggressively lending to the real estate sector. However, analysts believe that NBFCs prefer to invest in residential projects rather than commercial units mainly because of lower risk and quick returns.
Mr. Rajeev Talwar, Chairman, National Real Estate Development Council (NAREDCO) expressed his views on the importance of financing in real Estate Sector. He said “It is all the more important now to manage finance in real estate sector than ever before. After the RERA bill has been passed, large amount of the sales proceeds will have to be kept in escrow account. This will create a huge burden on raising capital for purchase of land and repayment of loans if taken against it. Getting external finance is the need of the day for real estate to flourish.”
Mr. Parveen Jain, President, National Real Estate Development Council (NAREDCO), avers, “The main reasons for interest of NBFCs and PEs in lending to the real estate sector are that they are expecting higher rates of interest, hard assets as collateral and hoping to trap sales proceeds in escrow accounts.”
Throwing further light and to bring out the importance of on the role of NBFCs and PEs in Indian real estate sector and various other aspects, NAREDCO under the aegis of Ministry of Housing and Urban Poverty Alleviation (HUPA), Government of India, is organising the 13th National Convention and Exhibition on August 19-20, 2016 at Hotel Taj Palace, Diplomatic Enclave in New Delhi. The convention aims to offer a platform to present distinctions between conceptions and strategies from eminent Banking Institutions, Private Equity players, Real Estate and Developer fraternity and also promises participation of personalities from the diverse fields such as Politicians, Bureaucrats, Contractors, and Material Suppliers across the Nation.
National Real Estate Development Council (NAREDCO), is the apex body of real estate sector, under the aegis of Ministry of Housing and Urban Poverty Alleviation, Govt. of India. Shri M Venkaiah Naidu, the Hon’ble Minister of Urban Development, Housing and Urban Poverty Alleviation, is its Chief Patron and six Joint Secretary level officers from Central Govt. and Central PSUs are on its Governing Board. Housing and Urban Development Corporation (HUDCO), National Housing Bank (NHB), National Building Construction Corporation (NBCC), DDA, LIC, HFL, PNB, HFL, HDFC, Cement Manufacturers Association besides leading developers like DLF, K Raheja, Hiranandani, Prestige, Shriram Properties, Tata Housing, Dewan Housing Finance, etc are the founders of NAREDCO. Objectives of NAREDCO interalia include promotion of housing and real estate sector in India and inculcate transparency and accountability for the benefit of the customers. NAREDCO and its State Chapters work in close cooperation with Central and State Govts. to achieve above objectives.