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Saturday, May 28, 2011

Sitting on Loses, Realty funds decided exit

Prises to decline 30% over the years



              Private-equity funds that made investments at the peak of India’s property boom in 2007 face losses of as much as 40 per cent as they seek exits over the next few years, according to Kotak Investment Advisors Ltd.
              Some of the values at which the capital got invested were crazy so there will have to be a write-down in valuations, Mr S. Sriniwasan, Chief Executive Officer at Kotak Investment, which manages $760 million in real estate assets, said in an interview in Mumbai on Thursday. There will be a significant amount of investments looking for an exit.
              Mumbai home prices have declined 20 per cent from their 2010 peak as lower sales, higher land values and increased borrowing costs has forced developers to reduce prices to woo buyers, said Mr Sanjay Dutt, Chief Executive Officer of business at the Indian unit of Chicago- based Jones Lang LaSalle Inc. Home prices in the city may decline as much as 35 per cent over the next two years, according to Liases Foras Real Estate Rating & Research Pvt.
              Private-equity funds may sell $5 billion of holdings in India’s real estate industry over the next two to three years, increasing the pressure on developers to generate cash, Nomura Holdings Inc said in a report last month.
              Funds have invested about $10.2 billion in real estate companies and projects in India, Nomura estimates, with the majority invested in the three years to 2008 when the industry was booming. The funds typically own real estate for between four and six years, so many of the investments made between 2006 and 2008 may be sold over the next two years, Nomura said.