Private equity funds give Punjab realty sector a miss
Private equity funds are reluctant to fund real estate projects, as the Punjab real estate market is dominated by local developers, the majority of whom are in the unorganised sector
Sep 26, 2014
Source : Business Standard
Private Equity


Chandigarh: Private Equity (PE) investments in Punjab's real estate projects were negligible as low returns on such projects and a decreased presence of organised players in the state were keeping equity funds away from the market, experts said on Thursday.

"The Punjab real estate market is dominated by local developers, the majority of whom are in the unorganised sector. Furthermore, there are very few organised players in the Punjab market as compared to Delhi-NCR, Mumbai, Banglore, Pune and Chennai, among other cities. Hence, private equity funds are reluctant to fund real estate projects. Above all, we have seen there has been a delay in project execution by these developers. Such factors are behind the non-presence of private equity funds in the Punjab market," Rubi Arya, vice-chairman & director, Milestone Capital Advisors, told Business Standard.

Arya said another reason was that many high networth individuals from Punjab were investing in real estate projects in developed markets such as Delhi-NCR, Banglore, Chennai and Pune, among others, through milestone funds, as they were getting better returns compared to past investments.

Experts said was more guided by an anticipation of profit. With the possibility of the new government driving the economy more, PEs were positive about India, especially about the real estate market in metro cities which are still untapped compared to tier-II and III cities.

As far as Punjab was concerned, the real estate situation mirrored the scenario prevailing in the rest of India. While realtors were finding it tough to bring down prices, customers were expecting a correction. This had virtually brought the real estate market in Punjab to a standstill.

"We don't mind taking PE funds, provided they are competitive compared to banks. Moreover, the cost of funds and their selection criteria is very tough. Probably, this is one of the major factors why many developers don't qualify for seeking funds," a local developer said on the condition of anonymity.

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