Beyond Capital: Private Equity and Real Estate
Development in India

Abstract

The real estate sector in India has attracted substantial investment from Private Equity (PE) investors since 2006. This study is based on an analysis of 290 PE deals in real estate and investment of $15 billion during 2004 – 10. During the period 2006 – 10, real estate sector accounted for 34% of the total PE investments in India. The characteristics of projects that have obtained PE investment indicate that these are very large projects. 80% of the PE investment in real estate has been from foreign PE firms. Most of the investments have been made at the project or SPV level, to facilitate better monitoring post investment. The diligence and active monitoring that is normally associated with PE investments have brought in the much needed transparency and better corporate governance standards to this sector. Tier 2 cities accounted for as much investment as that of Tier 1 cities. However, the average investment size in Tier 2 cities was much higher than that of Tier 1 cities. By taking top class real estate development beyond the boundaries of Tier 1 cities, the PE firms have in a way contributed to the development of some of the smaller cities.

TOPICS: Private equity, real estate, emerging