KOLKATA: Milestone Capital Advisors, a real estate-focused private equity (PE) firm, expects the credit squeeze to the real estate sector to end in the next three to four years, with banks expected to step up lending.
RBI norm hurdle
Banks reduced their exposure to the real estate sector in 2009 following RBI guidelines, creating high demand for PE advances at 24-25 per cent yield. In the following years, banks resumed lending to the real estate sector, but only to meet construction costs, that, too, based on strict due diligence on balance sheet.
Strict conditions imposed by banks kept the demand for PE funding alive at a reasonable 20-22 per cent yield.
“Banks are always preferred financiers for real estate,” Navin Kumar, Executive Director, Milestone, told reporters here. To capitalise on the short-term opportunity to earn high returns on real estate investments, the PE has launched a ?500-crore fund of three-and-a-half year tenure.
Kumar and his promoter Rubi Arya were in Kolkata to meet prospective investors as part of the fund-raising exercise. Of the total requirement, Milestone already raised ?150 crore.
According to Kumar, around 16,500 high networth individuals so far invested in various Milestone offerings. Of the total, nearly 25 per cent are from West Bengal contributing around one-fifth of the ?3,700 crore raised by the PE.
Exits on the cards
According to Arya, the PE is now planning exit a slew of investments in Kolkata, Bengaluru and Gurgaon. In Kolkata, the fund already made an exit from Godrej Prakriti integrated residential project. “It was an opportunistic last mile funding programme,” Arya explained. The PE is now preparing for exit from a commercial project at the IT-township in Salt Lake, Kolkata, at 1.7 times return in five years. In Bengaluru, the PE is contemplating exit from the electronic city project.