Private Equity is expected to take over from equity and debt
as one of the most sought after avenues to raise funds for construction
companies against fluctuating equity market conditions and increasing
interest rates.
Over $5 billion of committed funds, available in the form of
real estate funds are to be put in the market. On the private
equity side, there are a number of domestic and international
investors who are all prepared to come up with dedicated real
estate funds such as Saffron Capital Advisors, Dawnay Day etc.
A number of investments will be at the project and land acquisition
stage rather than the corporate level. Giving the attention towards
a single project is far easier than doing the same for entire
portfolio.
The PE Funding will be for commercial and office developments,
as residential real estate seems to be self financed. And there
is another reason for the commercial developments to go for such
funding.
It will help them to earn extra revenue once the project is complete.
Contrary to this, residential projects are often sold out in their
pre-construction stage and money comes in at once.
The listed construction companies have seen a drop of over 50%
in market value in the last few weeks. There are several factors
accountable for this including the general fall in the equity
markets, higher cost of home finance and stringent rules for real
estate companies.
