PE realty players bet again on luxury

Indian private equity players in the real estate sector are growingly focusing on the high-end and luxury projects. This is despite the fact that they burned their fingers with this strategy around 2008 when the great economic meltdown started taking its toll and among other sectors the real estate sector was adversely affected.

Analysts say PE players anticipate better returns in luxury, especially in tier-1 cities.

"Every PE player wants at least 20-30% returns. Add 30-35% profit margin of the developer and you can only have luxury housing," said a senior official at Liases Foras, a leading real estate consultancy firm in the country.

At present mostly luxury housing projects are coming up be it in Mumbai or in the non-premium outskirts of New Delhi or other metros.

Experts say renowned developers are mostly banking on luxury projects in Mumbai, National Capital Region (NCR) and Bangalore.

Estimates say more than 70% of the projects launched in Mumbai and NCR in past six months were marketed as luxury projects.

However, some equity funds are focusing on affordable housing.

Affordable projects are thriving and getting good returns too, but such activities are centered around tier-3 cities and investment amount is very small in these projects.