Tuesday, August 11, 2009

QIPs save the day for real estate players

QIPs save the day for real estate players
year has seen just one private equity deal in the real estate sector. In May, Sun Apollo India Real Estate fund made an investment of Rs 300 crore in Mumbai-based Keystone Realtors. According to Kamal Khetan, MD of Sunteck Realty, another Mumbai-based realty company, it makes better sense to go to the capital market than looking for a PE investor. “It is difficult to get in the right kind of investor. We are looking at a Rs 500-crore QIP to expand our operations.”

Understandably, the large number of companies in the real estate sector, which have taken the QIP route, are the trigger for others in the sector. Said Amber Maheshwari, director, investments, DTZ, an international property consultant: “In the present situation, companies in the sector have had a good experience with QIPs and will now look at the capital markets as well. With PE money not easily available, options are limited.”

Industry trackers point out that stringent rules for investments have been the reason for a lack of common ground between PE investors and the real estate companies. “Now, most of the PE funds demand that the investment in an SPV be made in tranches and be directly proportional to the developers’ capacity to finish projects in time,” said Biren Parekh, partner, (Real Estate), Ernst & Young.

It is gathered that in some instances, the option of bringing in PE investors as well as going public is also being considered. According to a senior official at Bangalore-based Nitesh Estates, which is looking to raise Rs 1,200 crore, half of the amount will come through IPO, while the rest through potential PE investors.

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