Realty fund managers cautious about investments after Covid-19 lockdown

Topics Coronavirus | Lockdown

With demand being muted for at least the next six months, developers might face severe cashflow challenges which could slow down the pace of construction further
Real estate fund managers are cautious about investing in the coming months. The March quarter of calendar year 2020 saw a 30 per cent drop in residential sales, and for the rest of the year the decline is expected to be in the range of 25-30 per cent.

“We have adequate dry powder over the next several months to make new investments. However, we will maintain a cautious approach in committing to new investments. At this point, our priority would be to focus on managing our existing portfolio,” Sharad Mittal, director and chief executive officer at Motilal Oswal Real Estate, part of Motilal Oswal Private Equity. It recently raised Rs 1,150 crore domestic real estate fund.

The real estate fund of Axis Asset Management Company will also exercise caution, said Balaji Rao, partner — real estate at Axis AMC. “We have funds we want to deploy. It all depends on whether projects are viable and cash flows are there,” said Rao.
He said they would have to assess the impact of the coronavirus disease (Covid-19) on the economy.

However, Amit Goenka, managing director at Nisus Finance, said there was a question mark on capital available. “Domestic investors will be cautious about committing money in private equity funds and foreign investors will not be willing to invest till the situation improves globally,” Goenka said. “We will be cautious in deploying our funds. We have to recalibrate our strategy and see which investments are averse to economic shocks,” he added.

Fund managers said demand for homes will be muted for the next six months.

Sunil Rohokale , managing director at ASK group, said green shoots had emerged beginning November last year in the residential markets of Pune, Chennai, Bengaluru and Delhi, but the Covid-19 and the resultant nationwide lockdown impacted the recovery.
“It will take 3-6 months for the sector to reach the pre-March levels,” he said, adding that long-term investors would return to residential properties in the next six months.

Mittal said with demand being muted for at least six months, developers would face severe cash flow challenges that could slow the pace of construction further. “This could lead to projects being delayed by at least four to six months and, depending on the pace of recovery of the entire economy, this could extend up to nine to 12 months, too,” Mittal said.

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