Private equity investments in the real estate sector are picking up pace this year, with a sharp rise of around 52% in value terms, an almost two-fold increase in exits and robust fund raising by some PE funds in the first nine months of 2013, compared with the January-September period of 2012.
Investments in real estate by private equity funds surged to $1,885 million (R11,687 crore) in January-September 2013, against $1,235 million (R7,657 crore) in the first three quarters of last year, shows data from VCCEdge, a data service by VCCircle. Total deal volume in 2013 year-to-date stood at 40, with a deal value of $1,891.23 million.
ASK Property Investment Advisors investing R147 crore in an ATS group project in Gurgaon; Kotak Realty Fund investing R110 crore in a project of TDI Infrastructure in Kundli; and ICICI Prudential PMS reportedly investing R80 crore in Kumar Urban Development’s township project in Pune are some of the key investments.
This is in stark contrast to last year, when investments in value terms dipped 15% against the previous year. Funds found it difficult to raise money, leaving their investment pipelines dry. Existing funds were unable to show returns to their investors, which created obstacles for future fund raising.
However, data now shows that in 2013 to date, PE funds have raised $640 million (R3,968 crore), compared with $1,047.67 million (R5,553 crore) raised in the full year of 2012. While the numbers are not strictly comparable, PE funds say those who have shown exits are being able to raise further funds.
“Those of us who delivered on our fiduciary responsibility to investors in the past have been able to return to the market and raise money. So you have seen some activity in terms of deployment this year,” says Khushru Jijina, managing director, Indiareit, the private equity arm of the Ajay Piramal-owned Piramal Group. Indiareit has deployed close to R800 crore this year alone, says Jijina.
Activity on private equity exits has also picked up. Exits have doubled and surged to $507 million (about R3,143 crore) in the nine months of 2013, against $180 million (around R1,026 crore) last year, shows data. As for the returns, PE players say equity returns are in the 25% range, notwithstanding high inventory levels and slow sales momentum. Total deal volume of exits in 2013 year-to-date stood at 31, with a deal value of $583.35 million.
“If one looks at