India’s cash-starved residential real estate market is set to get a boost from foreign and domestic private equity firms, which are lining up big bets worth hundreds of millions of dollars for the sector. Rising bad debts and real estate project failures have made banks cautious on lending to developers, leading to a slowdown in the property market that relies heavily on borrowing for both home building and buying. Developers in the country were typically averse to private equity as it is more expensive funding compared to debt they could raise from banks, or non-bank finance companies (NBFCs). However, with funding from NBFCs drying up in the aftermath of a string of defaults at lender IL&FS, developers are being forced to explore debt and equity funding from private equity. From a risk perspective too, risk is slightly lower as some green-shoots are visible in the segment. PE can see that pricing and sale pricing is at an all-time low, so valuations are at an all-time low, so it’s a good time for them to enter.” The government has also announced several incentives for the real estate sector in the interim budget earlier this month.

(DealStreet Asia)