ICICI Venture Fund Management Co Ltd (IVFMC), the investment unit of ICICI Bank Ltd, is planning to invest $250 million-$300 million over the next three years in realty, especially in the residential segment in India. At present, the company does not plan to invest in the commercial segment.
“We will be investing about $250-$300 million over the next three years, mainly in residential properties. I expect, by that time, the general market will also show signs of recovery. We will be soon raising fresh capital,” said Sanjeev Dasgupta, president for real estate, IVFMC.
He said, “The company plans to invest in new residential projects, even in projects which are (only) 30% complete. Developers do not have capacity to raise capital. Those projects are available today at attractive valuations.”
The fall in home loan rates is also a factor which is attracting investors. The venture fund is evaluating the market; it is not in a hurry to invest. “Investors are doing greater degree of diligence because a lot of things have gone wrong. They took a view on investment which involved a lot of risk and they thought they would manage it but they could not,” said Mr Dasgupta.
The company feels that the residential segment will see another round of small correction over the next six months as developers have increased prices at a rapid rate. “After the increase in prices, volume sales have dropped by 15%. Sales being currently witnessed are being driven by end-users and not speculative investors, contrary to what was witnessed during the boom,” said Mr Dasgupta.
“Till the first half of 2010, we are going to see few volume deals happening. We will see some degree of improvement from Q3 FY10 which again depends on many factors. As we are hearing some positive news on the economic front, we will see good growth in the real-estate segment,” he added.
The company is not thinking of investing in the commercial segment as most of the investors find that exiting from the asset is complicated and driven by many factors beyond their control. However, the residential segment has self-liquidating assets, so it is easier to exit and also get good returns.