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| Realty focussed PE funding skids 61% to $17 bn till May |
| Press Trust of India / New Delhi Jun 11, 2009, 16:43 IST |
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Fund raising by real estate sector focussed private equity funds have declined 61 per cent to $17 billion till May this year, as investors turned cautious while making new investment commitments.
According to a report by global research firm Preqin, PE investments till May this year, "has seen private equity real estate funds raise $17 billion, a reduction of 61 per cent on the same period in 2008". PE fund raising till May 2008 stood at $44 billion.
The report said with the slump in demand in the realty space, PE investors are being cautious and are making fewer commitments.
"It is perhaps natural that, given their cautious outlook, many investors will look towards more established markets, which they are more familiar with, rather than invest in emerging economies, which are perceived as being higher risk," Preqin said.
Although fund raising across the entire private equity real estate industry has declined sharply, the fall is particularly noticeable for funds targeting Asia and rest of world.
Fund raising by the Asia focussed funds declined 83 per cent over the year-ago period to $1.36 billion till May this year. The funds had raised $11 billion till May 2008.
"Asia and rest of world funds, which were responsible for 25 per cent of the aggregate capital raised in 2008, have accounted for just 8 per cent of the aggregate fund raising in 2009," Preqin said.
Besides, fund raising by the US and Europe focussed funds have declined 53 and 66 per cent respectively, the report noted.
"Many investors also feel that the best opportunities are to be found in established real estate markets of North America and Western Europe," Preqin said.
The report said as many as 12 Asia focussed funds have been abandoned or placed on hold since the collapse of Lehman Brothers in September 2008.
"It seems likely that more firms will be forced to abandon their marketing efforts if investors remain reluctant to commit to Asia and Rest of World Funds," it added.
Going forward, however, fund managers are of the view that North American and European investors would look at global realty portfolios and the Asia and Rest of World Fund raising would recover towards the end of this year and in 2010.
"In the longer term there remains huge potential for the expansion of the real estate markets in Asia and South America and for the private equity real estate industry to grow with this," it said.
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