Partnering for growth

Font Size

Print

Feedback

Email

Discuss

Related Articles

Realty firms on hiring spree againDLF profit crumbles 77%Realty demand up 15% in Q2‘Property rates to fall 25% in 12-15 months’

: GAUTAM VASHISHT

Executive Director

Investment, FIRE Capital Fund

Private Equity (PE) Players have been known to transform the invested companies by increasing their growth multi-fold through value addition and business insights on key strategic business decisions, in addition to allocating only “capital” to them. PE funds extend knowledge and financial support to all fast-growing sectors, of which real estate sector holds an important position. Effective 2004, when the real estate sector was opened to funding from private equity funds, it attracted great interest from the industry. Today the real estate sector understands the many benefits that PEs bring in and the players are aggressively availing this option. The sector is adapting faster to new residential and retail formats, development technologies and doing projects on mega- scale involving high levels of capital. The companies in this sector are moving towards adopting business best practices and transparency to ensure timely delivery, which needs to be put in place to leapfrog the industry into US$ 129 billion by 2012.

While the big real estate players have an edge over small players with easy access to capital & overseas markets, best business practices, international architects/ vendors and the capability to bring in seasoned professionals on board, the regional developers, despite having strong understanding of local markets are unable to scale up their operations. The Private Equity players, in this scenario, bring support to small players by participating in the project at SPV level. The regional developers have been catering to the real estate demand in Tier II & III cities, which were subdued markets earlier. There has been a pragmatic shift in favour of these cities which now offer a huge potential for real estate growth. Private equity players have identified this niche and developed partnership with emerging regional developers. Striking the right chord, with the right partner, at the right time and ensuring the real value addition at growth stages with security returns for the fund, are some of the many new challenges that such relationships need to address.