Private equity investment and real estate development

Abstract

Purpose – The purpose of this paper is to understand the trends and contribution of private equity (PE) investors in real estate development in India because the real estate sector in India had witnessed significant investments from PE firms in recent years. Design/methodology/approach – The study focused on residential segment of real estate development, as it is the largest among all the segments. Two types of analyses have been done in this paper: first was to compare residential projects with PE investment with those that did not have any PE investment. The results were based on an analysis of 453 residential projects. The second was an analysis of only those projects that had PE investment. This paper studied if there were differences in investment patterns between domestic and foreign PE investors, and dedicated and diversified PE investors. Findings – Projects with PE investment were larger, as compared to projects that did not have any PE investment. The results of this paper also showed that PE firms preferred to invest with developers who had significant experience in undertaking larger-sized projects. PE investments significantly happened in projects that were located in metro cities. While PE firms as a whole preferred to invest in project mode, domestic investors were more inclined to invest in a project structure as compared to foreign PE firms. Though foreign PE firms invested more amounts per deal on average, there was a negative relationship between foreign PE firms and the extent of their shareholding in the investment. Practical implications – Encouraging PE investment in real estate projects would contribute toward to increasing the transparency in the sector. Strengthening the domestic PE industry would increase investment flow for real estate projects. PE investors who are able to add value to their investments are able to obtain higher shareholding. Originality/value – Empirical research on Indian real estate industry is scarce because of the lack of transparency and availability of reliable data. This is one of the initial studies on the Indian real estate sector based on a robust dataset.

House price index (HPI) and Covid-19 pandemic shocks: evidence from Turkey and Kazakhstan

“…Similarly, Filotto et al (2018) used quarterly data ranges from 2007 to 2015 to reveal that residential mortgages loans (RMI) and HPI established a positive significant relationship with GDP while shock on GDP has a negative persistent effect on the HPI of 16 European markets. Additionally, Annamalai et al (2014) reveal that region with high growth in HPI and CPI in India tends to have greater private equity investment projects while Cheng et al (2019) established negative relationship between HPI and waiting time.…”

“…Despite, there are mixed findings on real estate pricing in general; some studies reveal that pricing behaviour is asymmetric (Annamalai et al , 2014; Cheng et al , 2019; Filotto et al , 2018), some studies found symmetric pricing behaviour of Covid-19 pandemic shock is also assumed to be an obstruction to the global economy which may be driven the negative expectation of investors’ income on HPI and could be further explained by rockets and feathers effects in support of the uneven movement of pricing behaviour. Obviously, series of studies investigated HPI from different perspectives due to undisputable contributions of real estate sector to the growth and development of national economy in particular and global economy in general (Annamalai et al , 2014; Apergis, 2015; Barros et al , 2012; Jadevicius and Gool, 2020; Mosquera et al , 2020; Tanrivermiş, 2020) and changes in the housing market could be dramatically observed (Kaya et al , 2019). Furthermore, findings on housing pricing behaviour remain inconclusive, therefore, related studies on asymmetric and symmetric of real estate pricing level discussed in the next two subsequent sections.…”

“…House price index (HPI) is a real estate related financial asset and real estate sector contributes substantially to the economic growth and development of several countries such as Turkey economy (Kaya et al , 2019; Tanrivermiş, 2020), Australia economy (Gholipour et al , 2019; Wang et al , 2017), India economy (Annamalai et al , 2014), Portugal economy (Mosquera et al , 2020) and Netherland economy (Jadevicius and Gool, 2020). In general, the role of real estate sector is indispensable to the economy of any nation (Abidoye et al , 2019) and becoming essential investment tool for individuals and administrations (Kaya et al , 2019).…”

“…Investment on real estate is expected to remain profitable as long as the global population keeps increasing. Similarly, the increase in global population has translated into a significant increase in demand for residential properties which is the core of the real estate sector in India (Annamalai et al , 2014). However, Covid-1 9 pandemic impacted on real estate sectors directly or indirectly which could have adverse effects on HPI.…”

Perspective of Developer, Buyer, Financier and Equity Participants in Real Estate Project Development Process in India: An important constituent of Construction Industry

“…The real estate developers face the financial challenge at multiple phases. It starts from financial support for land acquisition, financial support for project development, financial support for construction and finally needs financial support for sales and marketing (Annamalai, Bansal & Gemson, 2014) [1]. The constraints of funding institutions like commercial banks and external borrowings motivate real estate developers to look for alternative source of financing.…”