PE firms make 15 investments in real estate

NEW DELHI: The pace of private equity investments in the real estate space is picking up. The April-June 2011 quarter saw 15 investments in real estate projects and companies compared to 9 during the same period last year and 12 in the previous quarter, according to Venture Intelligence, which tracks PE and VC investment activity. Approximately $504 million were invested by PE firms across 10 deals in this quarter where investment values were disclosed.

Some of the large deals in the April-June 2011 quarter included Warburg Pincus’ investment commitment of over Rs 1,400 crore to Oceanus Real Estate, a 49:51 joint venture with its existing hospitality portfolio company Lemon Tree Hotels, JP Morgan’s $30 million investment in Parsvnath’s Developer’s residential project La Tropicana in Civil Lines area of north Delhi, Monsoon Capital’s Rs 70 crore investment in Phoenix Group’s Golf Edge mixed-use project in Hyderabad and Texas

Pacific Group Capital’s Rs 450 crore investment in Shriram Properties for a 15% stake in the company. The residential segment (including townships) accounted for 73% of the deal volume during the latest quarter. The investments during this quarter were split equally between south, north and west India.

A majority of the investments in the real estate space today are being made at the project level. A number of deals that have close recently are either last mile funding to the developer for finishing a project or receivable financing, where developers pledge a part of the future installments that they are to get from customers who have already booked a home in the project, to repay the lender.

Private equity has emerged as the preferred route to raise capital for developers as banks have decided to reduce their exposure to the segment and are financing only select developers and projects. Developers are also raising money through non banking finance companies.