PEs takeover NBFCs in Real estate funding
In the backdrop of sustained caution among Non-Banking Finance Companies (NBFCs) with their exposure to real estate, private equity firms are emerging as the largest source of funding to developers.
NBFCs had turned aggressive with their lending to real estate sector over the past few years, but had to slow down in the last two quarters, given the liquidity circumstances. While NBFCs are crawling back and have started investing, they are selective with quality and liquidity of assets they are investing in.
The liquidity gap that has been created by NBFCs going slow on investing in new assets has provided private equity players a robust pipeline of real estate project financing transactions. Private equity firms have invested $1.80 billion across 20 deals between October and March, showed data from Venture Intelligence.
However, given the rise in risk perception and paucity of capital, private equity firms are also filtering their options well before making any financial commitments, and this has increased their return expectations as well.