PE Investments in India on a Rise: Is it the Modi Effect?

Since Narendra Modi's smashing victory in the recent elections, there have been countless good news for the country. The GDP rate is increasing, an Indian space craft has managed to reach the Mars in its first attempt, infrastructure is developing, and prices of general commodities are decreasing. The list is endless. It is refreshing to have a politician who has freed himself from the shackles of religion, caste and creed to lay emphasis on the economic and social development of the country. The sudden rise in Private Equity Investments in the infrastructure and allied spheres is a yet another testimony to this 'Modi' effect.

Photo Credit-India.com

We all know that the last few years have not been good for real estate as there was an acute liquidity crunch. Funding institutions, whether national or international, were skeptical about investing in the country. Lack of proper guidelines, multiple approving channels and the problem of nepotism and corruption were the major reasons for the same. Overall, this scenario was putting the government in a tight spot, because with no cash in hand, debts would quickly escalate.

A sense of revival is witnessed with Modi's entry in the scene, with a fresh wave of realty based Foreign Direct Investments hitting the shores of the country. It has been reported that the recent meeting of Narendra Modi with Japan, China and US counterparts has secured investment worth billions of dollars for India. It is not just offshore investments, but domestic investors are showing keen interest as well. The best example is ASK Property that has recently launched Rs 1,500 crore worth of domestic fund to be invested across real estate projects in Mumbai, Pune, Chennai, Bangalore, Delhi-NCR and Hyderabad. Based on a report by VC Circle, funds worth around 855 million dollars (Jan-Sept) were invested across 32 real estate projects and companies in 2014 as compared to 670 million dollars in the same period in 2013. This is expected to increase in the coming years as the current funding would fuel the market further.

Another change that is witnessed in Modi's tenure is that earlier only PE funds and Non-banking financial companies made the move towards Indian realty, but today a good number of sovereign wealth funds and pension funds also find a spot in the list of investors. This September, Government of Singapore Investment Corp. Ltd (GIC) signed a Rs.1,500 crore worth of joint agreement with Bangalore-based Property firm Brigade Enterprises Ltd to invest in residential and mixed-use projects. This investment is not only for development, but also for acquiring new land parcels.

All these instances definitely prove that the industry is well on its way to revival, but with a warning. Yes, there have been substantial investments in the realty industry but old investors are not turning up. They still find it intimidating to invest in the country due to the bad experiences they have had in the past. Keeping this in mind, we hope that the Prime Minister to bring greater regulation and transparency in the sector. We need industry friendly but clear regulations, better tax mechanisms and a single window approval system for real estate and infrastructure projects in the country. If all of these are efficiently implemented, there is absolutely no looking back for the Indian economy.