HOW ARE PRIVATE EQUITY REAL ESTATE MAKING MONEY?


Private Equity Real Estate is an asset class consisting of equity and debt investments in property. Investments mainly involve an active management strategy ranging from moderate reposition or releasing of properties to development or extensive redevelopment.

The Indian real estate sector has been improved a quick pace growth over the last few years with its stakeholder profile evolving from locally-focused, privately owned enterprises to increasingly corporatized, professional  organizations funded with public capital and having multiple market and product strategies.

As a result, Indian real estate has seen a remarkable flow of capital in recent years, both from foreign and domestic sources. The developer community is adapting to the requirements of joint venture arrangements with capital sources by providing improved transparency and higher professional standards. The preferences of commercial space occupies as well as residential space buyers are improving in designs, engineering  and  construction quality.

The segmented nature of the developer community provides scope for Real Estate Private Equity (REPE) funds to source off market investment opportunities and strategic relationships. This has led to Indian high net worth individual (HNI) viewing domestic REPE funds as a preferred asset class for diversified investment.

The demand for quality residential and commercial real estate investors is proven and sustainable than small retail investors since the minimum ticket size in most funds is Rs.25 lakhs. There are many strategies are adopted for private equity fund managers. Among them the most important are core investing, core plus investing, value added investing, and opportunistic investing. However the tracking trends in this industry serves as invaluable and measurable indicator to assess investors ‘ real estate allocation in their equity portfolios, in addition to helping answer the question of whether to gain access through direct ownership of real estate or via a passive strategy through publicly traded assets.

Private equities primarily focus on superior risk-adjusted yields. The main objectives of private equities are the attraction of capital, sourcing and qualifying investment opportunities, fund and investment structuring, and exit strategies
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Direct investment versus private equity investment
While investing directly a property allows you to possess the property, but it also requires more work such as to first identify   the location and a property where it is having a growth potential and vicinity. Then the person has to do certain paperwork, that it should be registered , and find a tenant if the person wants to earn a regular income. If the person goal is for capital appreciation, than the process again prolongs as by finding a purchaser that makes the person to cross his target.

In a private equity fund you have to just put the money and the fund takes care of everything else. The advantage of private equity funds are that the investment spreads the risk by investing in projects across the locations. As an investment in a PE fund is a private contract between the fund and the investor, the funds avoids divulging their valuations and returns yielded by their investments.

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