PE players bet on India's affordable and low-income housing sector

Date : May 2, 2014

BANGALORE | KOLKATA: India's affordable and low-income housing sector, which is short of millions of homes, is set for expansion with the segment finding favour with real estate-focused private equity funds. New York-based not-forprofit venture fund Acumen is looking to invest in this space in 2014, while Mumbai-based PE fund Avenue Venture Partners has tied up with Pune's Vastushodh Projects to invest in their affordable housing projects. Another PE fund, Brick Eagle Capital Advisory, plans to incubate companies to fill gaps in the affordable-housing ecosystem.

India has a shortfall of about 22 million homes, of which 5-6 million are in the affordable housing segment. "Affordable housing is recession-proof and sells regardless of market conditions," said Rajesh Krishnan, managing director and chief executive of Brick Eagle Capital Group.

"This segment offers one of the best risk-adjusted returns." The private equity fund is planning to raise $100 million in offshore funds to acquire 1,000 acres in and around Mumbai this year. The fund has already invested and acquired 900 acres across Chennai, Mysore and Mumbai. Better margins of over 25% are also driving funds to invest in affordable projects on the outskirt of Tier I cities. Affordable housing fund Avenue Venture Partners recently invested.`20 crore in Vastushodh's affordable  housing project on the Pune-Solapur highway. The project entails 1,500 units priced between Rs6 lakh and Rs14 lakh.

"With the real estate market getting tougher, the affordable segment will grow with more and more people migrating. The focus is slowly shifting to where the real demand exists and builders are also looking at unique avenues to build affordable homes," said Akshay Dewani, chief investment officer, Avenue Venture Partners.

The fund is also looking to raise about Rs400 crore to invest in affordable and mid-income homes on the outskirt of cities like Pune, Bangalore and Chennai. According to international property consultancy JLL, affordable housing projects near Mumbai, Bangalore and Delhi have met with encouraging buyer response.
 

"In 2013, one-third of the total launches in the residential sector were in the affordable segment. In 2012, the figure was around 26%," said Anuj Puri, country head, JLL India.

The affordable housing segment has also attracted large companies like Tata Housing and Puravankara ProjectsBSE -1.79 %. Builders have launched affordable homes in the Rs10 lakh toRs35 lakh price bracket, with northern India receiving the bulk of fresh investments. Another fund that is betting big on this segment is LIC HFL Urban Development Fund.

AK Sharma, CEO of LIC HFL Urban Development Fund, said easier and self-liquidating exit options are attracting funds to this segment. "This is a safe segment, as affordability is the biggest issue in the current market. Also, this segment is fuelled by end-users demand that helps in quicker exits for funds," Sharma said. The firm has invested in affordable homes of Value and Budget Housing Corporation and Mahaveer Builders in Bangalore. However, faster approvals, support infrastructure, low cost of funds, tax incentives and easier FDI process are all challenges that developers face.

Source And Courtsey By :-http://economictimes.indiatimes.com/markets/real-estate/pe-players-bet-on-indias-affordable-and-low-income-housing-sector/articleshow/34448885.cms