It looks like the real estate industry is not happy with SEBI though it has permitted Alternative Investment Funds (AIF) to start shop in the country with freshly postulated policies that allows aggregating funds for investments in segments like realty, hedge funds and private equity as the industry is looking eagerly at SEBI to take some measures to bring transparency after the rejection of some applications, its ticket size, and the entire subsidy setting in the realty market.
The Alternative Investment Funds (AIFs) with few realty players, which was considered as the last hope appears like going towards a situation that seems irresolvable in the future and this has arisen questions that whether developers have failed to crack the funding puzzle with AIFs or it is not viable for the sector.
Here are few actualities why the AIF is heading to logjam:
During the Year 2013, about 70 AIF vehicles were set up in India. In accordance with AIF strategies, realty funds pooled come under category 2 and 3. Presently, funds pooled under category 2 and 3 are used to manage an obligation of above Rs.5,000 Crore. The setup is on the go but only few fund managers with a robust track record were able to get generous obligations, while new AIFs or family owned funds/trusts that want to raise third party capital found it hard to pool significant fund.
Few analysts doubt whether AIFs will succeed in India particularly when REITs will be implemented. One of the industry veterans says that when REIT trust comes it will mainly buy income generating realty assets and keep it with them until they sell it. Considering the investment limits both AIFs and REITs could target a different segment of investors, with Rs.1 Crore as the minimum investment limit AIFs will aim at the HNIs and institutional investors whereas the REIT will concentrate more on retail investor. Also, AIF will invest in different industries while REITs will dedicate its investment in the realty sector.
With these differentiations both AIFs and REITs exist together in the country. The prevailing policy and regulatory structure with respect to raising and investing is strong and postulated well. But, the real estate industry is willing for policy that specific to the market and will recognize the problems surrounding the realty funding and its group of companies. It is also considered that AIFs will aid the sector with the required fund as few financial institutions don’t lend real estate developers for buying land and AIF will come forward help such developers and major segments like housing, commercial, and retail is likely to grow.
One of the real estate developers says that is really bad that investors are unwilling to choose such safe investment options as it will serve as alternative investment during the liquidity crunch. Though there are many differences between REIT and AIF but the implementation will carry some noticeable changes in the cash-struck industry.
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