Rama Krishna Sangem
Sudhakar Gande, Tech Entrepreneur and investment banker, has said that the real estate sector in India is poised for a big growth provided it adopts professional standards and institutional funding. He was participating as the chief guest at REPA (Real Estate Premier Associates), India’s first real estate business network, in Hyderabad on November 12, Tuesday. The theme of the event was “Nuances of Real Estate Finance”.
REPA was founded by TSM Prasad, chairman and CA Rajesh Donkeshwar, vice-chairman. REPA partners with all real estate industry stakeholders and aims to help members embrace with latest industry trends and promotes collaborative networks. Sudhakar Gande who held several finance and banking institutions earlier and now is associated Jupiter Capital and other finance institutions now said that the sector should gear up the coming challenges.
“These are one of the best times for real estate business in India. Globally, real estate sector is far more financed than in India, in other words financiers like banks, institutions, lenders, funds etc. have far higher exposure to real estate sector globally,” he said. Gande called for enhancing professionalism and transparency in financing of real estate sector to get access to funds for bigger projects.
Here are the points mentioned in his speech:
Several AIF’s started setting up in India and launched specific real estate funds to finance real estate sector. More real estate funds (US funds started, Japanese funds yet to start) are expected from different parts of the world looking to finance Indian real estate sector. More globally proven real estate products are likely to start entering and growing in Indian markets like REITS.
Tech started playing an important role in Indian real estate sector and moving forward the role of tech will be significantly increased in Indian real estate sector. For ex: Inkers AI product will improve the efficiency of construction management by 15% and reduces the cost by 5%.
Pros: Lower interest rates Predictable repayment schedule Long tenures suitable for large projects Cons: Stringent eligibility and documentation Slow approval process Limited flexibility Loans from non-banking financial companies for higher-risk projects. Pros: Faster disbursement Flexible terms Willingness to finance high-risk projects Cons: Higher interest rates Shorter loan tenures Higher risk of asset liquidation
Strategic guidance
Investment from PE firms in the form of equity or debt. Pros: High-value funding Strategic guidance Willing to take higher risks Cons: Loss of control for developers High return expectations Complex exit strategies Foreign loans for large-scale projects. Pros: Access to lower interest rates Flexible terms High-value funding Cons: Exposure to foreign exchange risks Strict regulatory requirements Suitable mainly for large developers
Pooling funds from investors to buy and operate income-generating real estate. Pros: Liquidity for developers Allows investment in real estate without direct property ownership Provides capital for new projects Cons: Limited to income-generating assets Complex compliance with SEBI Returns tied to property income
Funding for innovative or tech-based real estate models. Pros:Supports innovative projects Provides strategic guidance Faster funding for unique models Cons: High control by VC firms High return expectations More suited for tech-driven ventures
Tech started playing an important role in Indian real estate sector and moving forward the role of tech will be significantly increased in Indian real estate sector. For ex: Inkers AI product will improve the efficiency of construction management by 15% and reduces the cost by 5%.
Conclusion
The global financiers and funds, etc look at quality of management team to finance the projects. All aspects of project including approvals, compliance issues, etc are satisfied before approaching financiers
Look at larger and more complex projects which are far moreeasier to finance. Professionalize management teams i.e hire top quality CEO’s and CFO’s to run and manage your business. Keep your eyes and ears open to M&A options- at project levels, at company level Develop co-investment opportunities with financiers, investors (including global investors)
