Saturday, June 14, 2008

Realty wisdom - "build frill-free houses"

PE funds clearly having the upper hand. If you had longed for a piece of India’s realty pie and couldn’t get in because of unjust valuations, now is the time. Why, you can even wring and squeeze them on terms your own.

Industry experts feel the only avenue available for raising capital in the current situation is at the project SPV level and by way of private equity or similar sources, that is generally the most expensive method of raising capital. Concerns about liquidity will continue to plague the market since debt will not be easily available. Real estate players had traditionally raised money from debt funds via corporate deposits and commercial paper. However, debt funds are currently not eager for more exposure in real estate and are continuously rolling over the debt advanced to these players. The primary source for institutional funding will, therefore, now be private equity.

So, there you go. Pick up the thread and buy into a few near-finished projects on the cheap. By all means worry about inflation and falling sales numbers. But India is still a market with large unmet demands for housing. All that you need to do is drive some sense into your portfolio companies to build affordable, frill-free houses that people can call home – where end users drive demand of what was once a neat long-term investment; we used to call it `property’ then - ringing in permanence and legacy - not an `asset class’ as defined by wealth managers now.
[Caution - Sales pitch. If you are a realty / infrastructure player looking out for some large funds for your FDA compliant project, I have a few private equity investors that are interested. Just send me a mail at with your project report / business plan and I shall be glad to assist.]


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