Realty funds step up investments
Home-grown real estate funds are stepping up investments in residential projects. However, there are two sides to a coin as they are unable to address the huge funding gap as non-banking financial companies (NBFCs) continue to lag in financing real estate projects.
The demand for capital is significant, particularly in the housing sector, as home sales continue to be slow and external financing is needed for construction and to service debt.
The NBFC liquidity crisis has opened up a financing opportunity for alternative investment funds (AIF), privately pooled investment vehicles that are incorporated in India, which are actively investing and evaluating real estate deals.
A March report by CLSA had said that 15-20% of the debt ($60-70 billion) may be stressed because of high leverage of developers and weak sales, mostly in the under-construction housing segment.
The need for capital is across the developer spectrum, but unlike NBFCs, which made debt easily accessible for even smaller, mediocre builders, PE funds are more careful about where they put their money.