Indian Millionaire shifting investment within Real Estate Asset Class

apartmentsBy Accommodation Times Research Bureau

Instead of projects, Indian Millionaire shifting their investments to companies and players. The conventional way of investment in properties is changing. The investment in under construction project is risky and depend on external forces to complete. Where investment in the company through instruments like Debentures and preference shares including private equity is in fashion. Investment is safe in the shares and Security and stocks or floating charges on fixed assets of the builders’ company instead of project.

Investment in project needs to go for agreement for sale which requires stamp duty and registration. But investment in projects, per se is a risky avenue hence international property investment in Indian Real Estate are shifting their focus and vesicles.

Instead of residential asset class, commercial property projects are much sought after stocks. Majority of investors are have shifted from residential segments to commercial segment. The shift and preference are due to huge supply and stagnation of price in residential segments. Investors were use to ROI of 40 to 70% p.a. during 2007-08 and in 2011-12.

Piramal Fund Management Pvt. Ltd, part of Piramal Capital, the financial services unit of Piramal Enterprises Ltd, is set to launch a $250 million (aboutRs.1,600 crore) platform with a pension fund to undertake equity investments in residential projects. Unlike direct buying, where an investment can appreciate significantly within a year, your realty PE portfolio will appreciate only after 2-3 years. Realty PE funds typically have a tenure of 5-8 years. Some PE players fund only last-stage liquidity gaps. The tenure of such funds is shorter than that of the development-based funds. Rental-based funds also have a shorter tenure.

The shift of focus on companies instead of projects though safe but restricting capital appreciations and IRR which otherwise would have been earned.

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