New Year brings in PE deals for the Bangalore real estate
Bangalore witness strong private equity interest in real estate
The New Year started with a boom for the Bangalore realty market. The realty in the city is attracting private equity investments in the real estate sector. Multiple sources had been quoted as saying that many deals topping $10 million (above Rs 60 crore) have been concluded or are in advance stages of closing.
Last year too, Bangalore attracted the lion’s share of private equity real estate funding, outnumbering all the other metro cities. The IT capital attracted three times the share of investment received by second placed Pune.
Aditya Birla Group’s had just concluded a $17 million (above Rs 100 crore) equity deal with Shriram Properties, wherein the Birla entity will hold a 49% stake in an upcoming Shriram residential development located along Old Madras Road. Vaswani Group too has got $10 million funding from J P Morgan.
It has also been learnt from the sources that Fortuna Projects is in advance discussions for over a $10 million structured financing deal with the Milestone Capital Advisors which has assets around Rs 3,200 Crore. Fortuna is also in preliminary discussions with Motilal Oswal Private Equity for a similar sized structured investment at the project level.
Views of Real Estate Industry
Executive director of Capital Transaction Group, Knight Frank India, Mr. Rajeev Bairathi said, “Bangalore and Chennai are seeing a healthy absorption of residential units due to fresh jobs being created.” It is learnt that both the southern metros cumulatively absorbed over 12 million sqft of fresh office space last calendar.
Bangalore, in the last two years, on the back of a stable price regime has been reporting a 15% to 20% growth in absorption of residential units. MD, Capital Markets at Jones Lang LaSalle, India, Mr. Shobhit Agarwal said that absorption and capital value appreciation in Bangalore have been in sync with each other, as opposed to the scenario in the two big markets of Mumbai and NCR.
Mumbai and NCR have seen less realty absorption primarily due to a 50% to 60% appreciation in residential prices in the last 24 months. Mr. Rajeev Bairathi said, “Private equity investors are extremely cautious with both markets due to the overhang of inventory.”
Impressing revenue earnings
The impressive revenue of the builders in the October to December quarter in Bangalore is also reflecting the buoyant mood. Considering the growth of the city based developers, Nitesh Estates reported a 319% jump in revenue and a seven-fold increase in net profit, Sobha Developers reported a revenue and profit growth of 26% and 10% respectively. South India’s largest developer, Prestige Estates Projects, sold 1,204 residential units and 26,000 sqft of commercial space aggregating to sales of Rs 1, 260 crore in the December quarter.
Source: The Times of India
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