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. According to the real estate global consultancy, till date, foreign funds and institutions have raised approximately $30 billion to be invested in Indian real estate with an estimate of $3 billion that has been committed.
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.
Says Kunal Banerji, president, marketing, Ansal API, “Yes, it is true that private equity players are showing a lot of interest in this model. The returns on investment are good and the demand for integrated townships is ever increasing. An investor needs to look at both the micro and macro aspects and this model incorporates both.”
Analysing from a broader view, 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. “Foreign direct investors are bullish about this concept which is relatively new in India.
Plus as a model it is hassle free as the government doesn’t play an active role in designing the infrastructure here. It augurs a growth of infrastructure and realty in the country and hence is a positive development,” feels Atul Mehrotra, executive vice president, marketing, Uppal Group.
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