Not-so-attractive returns on offer and an opportunity, dismal performance of most players to tap the market directly are keeping HNIs away from the real estate funds, which are trawling the money market for investors.
Now, Real estate funds are finding it difficult to raise fresh funds as their mainstay investors, the high net worth individuals (HNIs), are turning their back on them.
Realty has historically been a favourite of HNIs, who have invested even in tough times.
Senior vice-president and head (private banking, India), Sutapa Banerjee, ABN Amro Bank commented that, “The interest in real estate has not dried up. Property continues to be a significant part of an HNI’s portfolio.” In addition, there seems to be some discomfort with funds investing in realty.
During the first major fundraising in 2006-07, funds were highly optimistic on the sector. But after the crash in 2008-09, exit with decent returns became a major issue for them.
HNI advisor, Jayant Pai said, “Investors generally have a recent bias and the recent happening isn’t very good. The existing funds have promised good returns, but they are still on paper; these exits have not come through. A good amount of funds have extended their exit time period, this affects the internal rate of return.”
Pai also said that banks, are turning bullish on mutual funds now which earlier helped market such sector-focused PE funds.
