Real estate fund managers are very much disappointed, as the full cycle of real estate private equity funds has come and the exit value is not up to their expectation, it is almost half of their anticipation. Therefore, all the investors are looking pretty much reluctant to invest in real estate focused funds as this has become difficult for them to raise the money internationally.
“The value of land moved faster than that of the project, so if in 2006 you were sitting on a land you would have now made 5x returns on it than what the developer did by developing a project on it”- opined the director of Certes Realty Pvt. Ltd.
For the developers this low fund returns has been proved to be a reminder that build up the land bank is just a part of the developing business while proper selling proposition to the customers, handling the approvals and salability of the business model holds equivalent importance.
Introduction of private equity funds in real estate can be affirmed to institutionalize the family owned real estate and bring more transparency and funds can do repeat business with the developers.
The real estate PE exit multiples is in the range of 1.8x- 2.5x, while there is a higher risk involved if the property is not at its salability par, while PE exit multiples in land is about 5.2x, expert opines.
By Priyanka Das, 28 February 2013, New Delhi