India poised for $5b wave of PE exits from real estate

MUMBAI, May 19 (Reuters): Private equity investors are poised to exit roughly $5 billion worth of Indian real estate investments in the next two or three years, a Nomura report said, adding pressure to a sector struggling with access to capital and falling property prices. During the boom years of 2006-2008, India attracted an influx of private equity in property, a big chunk of it structured as debt, and in some cases developers will be forced to buy back the investment from the PE firms, the report said. "This will increase pressure on developers to generate cash flows through affordable pricing and better execution," Nomura analyst Aatash Shah wrote. "The fact that a large section of those investments are actually quasi-debt in nature and the projects in which investments have been made are significantly delayed, is a cause for concern as far as the cash flows of developers are concerned," the note by the Japanese investment bank said. Shriram Properties, DLF , Lodha Developers, Phoenix Mills and Unitech are the top recipients of private equity in the industry, it said. Top PE investors are Kotak Realty Fund, Red Fort Capital, Citigroup , Sun-Apollo Ventures and Bank of America-Merrill Lynch , it said. The property industry has had a harder time attracting bank financing following a spate of scandals over the past year and worries about business practices in the thinly regulated sector. Rising lending rates and volatile equity markets have also clouded the fund-raising outlook for developers, many of which have put their IPO plans on hold.