Occupied buildings the new favorites for PE investors

Now private equity investors are increasingly seeking to invest in occupied commercial buildings. Such properties have become their new favourites in the real estate sector. Rental yield funds like IL&FS Milestone Fund and JM Financial Real Estate Income Fund have already invested in such assets and more new funds are being raised for investment in this segment. This has become a new development in a property market at a time when real estate developers are focusing on management of cash flows in order to cut down on debt and also to fund development projects. Although sales figures in the residential real estate market has slowed down the same is witnessing a healthy growth in the commercial office market. This is due to the ongoing expansion plans in the Indian corporate sector comprising IT/ITes, BFSI and pharmaceutical companies.

Leading real estate consultant Cushman & Wakefield revealed that rentals have gone up in Gurgaon (5 to 10%), Bangalore (10 to 15%), Chennai (4 to 9%), Kolkata (10 to 19%) and Mumbai (10 to 13%) during the last one year. According to Ramesh Jogani the managing director of Indiareit Fund Advisors which is planning to launch an Rs 800-crore rental yield fund in August this year his company is focusing on investing in AAA-rated properties with AAA-rated tenants. He said such tenants carry minimum risk.