By: Bhim Yadav, CEO, Falcon Realty
In the coming months, the pressure will be to reduce debt-to-equity ratios. With so many developers in debt already, the industry is trying to come out of the situation and 2012 will not be much different. It won’t be easy and the developers are trying various routes. Selling of developed projects, vacant land is a route taken by many developers. Several developers are now providing attractive terms to PE funds to securing funding.
The year 2012 will also see reduction in fund raising through QIP and also a decrease in real estate IPOs. It is expected that whatever is gained from IPOs will be utilized in completing the projects at hand and also in making repayments of debt.
The financial situation is such that the market will see a situation where developers with good back up and repute will survive. All the developers with good standards, governance and project delivery will get better share of performance. The time will also witness smaller developers or the distressed projects of smaller developers being acquired by other players at lower prices.
The market has made banks and institutional lenders more cautious when it comes to lending to real estate sector, this means that in the coming year dependence on private equity funds and NBFCs will see an increase. Keeping in mind the market situation it is expected that private equity investors will also become cautious. And investors who will continue to invest might go only for core and core-plus type investments, and less risky residential projects that are close to metros.
Another fund raising route that is being tried in the sector is the one to bypass the rule that does not allow debt financing of real estate projects. Recently, someone with experience in good global financial company bought an NBFC, which is planning to get PE fund to pick up stakes in it.
