Monday, December 10, 2007

RE funds eyeing township projects

Integrated townships seem to be the preferred investment option for private equity (PE) players in India. In fact, a Cushman and Wakefield (C&W) report finds that 28% of PE investors favour investment through this route in the real estate market.

Integrated townships — as a low risk investment avenue due to their diversification benefits and low entry cost — are a highly attractive option. Agrees Sandeep Singh, national head, capital markets, C&W, “In today’s high land price scenario, integrated townships offer higher value creation opportunities due to low entry costs for land and synergies created by mixed-use development within them.

Industry players also feel that it is only natural for investors to look at this asset class as a lucrative option. “Only integrated townships have the capacity to absorb a significant amount of capital that is raised ...this also means that in the years to come, this asset class is bound to grow by leaps and bounds,” feels V Hari Krishna, CIO, Kotak Real Estate Fund. Moreover, a mix of various services in these townships such as hospitals, recreation, education etc makes them win an edge over the other models.

The report also finds that investments in the market have spread rather evenly over three broad investment vehicles. While majority of the investment still remains either at the portfolio and SPV level partnership, at 40% and 36% respectively, the number of entity level partnerships formed 26% of the total investment in the sector.

Source: Economic Times

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