Private equity (PE) firms are zeroing in on the residential market in the national capital region (NCR) as a good investment opportunity. Despite a slowdown in the economy, the return on real estate investment in this area has been stable due to a constant demand from both end-users and the investor community.
The NCR region -- Gurgaon, Noida and Faridabad – accounts for the largest chunk of the residential stock in the country.
Some of the recent deals in the region include PE firm ASK Property Investment Advisors investing Rs147 crore in ATS Group’s Gurgaon housing project. Similarly, Xander pumped in Rs 280 crore into Supertech’s township project in the city, while Red Fort Capital infused Rs 1,000 crore into a Lotus Green project. Besides, Ashiana Homes recently secured Rs 180 crore funding from Piramal-backed Indiareit for its Gurgoan project.
Consultancy Jones Lang LaSalle (JLL) has also set up a separate entity, Segregated Funds Group, to raise capital to invest in Indian real estate.
Amit Bhagat, CEO and Managing Director (MD) of ASK Property, says: “Any emerging growth corridor, which attracts investors and consumers, will always be a focus area for us. The Gurgoan-Noida corridor already has a high job creation base and, therefore, attracts investments.”
Bhagat adds the company is in talks with other developers in the NCR region to ink a deal. “If a project shows a 30 per cent growth, our investments will also show a similar growth pattern.”
Delhi NCR is the largest urban agglomeration in India and the second largest in the world, says JLL.
"All three real estate sectors in Delhi NCR – office, retail and residential – are displaying growth on account of the suburban towns surrounding the prime city. The market drivers in these regions are the considerable untapped development potential, and the substantial financial viability and the affordability they offer to both developers and end-users," says Ashutosh Limaye, Head, Research & Real Estate Intelligence Service, JLL India.
Rohit Raj Modi, Director, Ashiana Homes says the demand is highest in the mid-tier residential category with houses priced in the bracket of Rs 30-80 lakhs. “The demand is always there in the mid-income segment and PE funds look at developers’ track-record before making an investment.”
According to a report by Knight and Frank, a property consultant, the NCR market has been gaining momentum as developers were focusing on completion. The NCR witnessed a total absorption of 35,000 units in the first half of 2013, showing an increase of 18 per cent from a year ago. Increase in sales can also be ascribed to the high number of project launches in the affordable category, it added.
Shishir Baijal, Chairman and MD , Knight Frank India, says: “The NCR residential market indicated signs of stability in H1-2013. Nearly 49,000 units were launched in this period showing a marginal increase of 11 per cent compared with H1-2012. However, a comparison with the first half of 2011 and 2010 reveals a dip of 33 per cent and 59 per cent, respectively. It is quite evident that developers are keeping new launches in check in order to bridge the supply and demand gap.”`