An average Indian individual, who earns a substantial income, wants to invest his hard earned money into something that results in huge returns in 5-10 years or over a longer period of time. However, choosing the right venture to invest in is not everyone’s cup of tea. Much study and analysis is required to find the suitable investment venture for yourself. Mutual funds, equities, fixed deposits etc. are some common modes of investing your money. The newest in the league is Real Estate PE Fund and is gaining much attention from avid investors.
The times are good for the real estate industry. Developers were earlier cash-crunched and needed funds to launch new projects and continue with their existing ventures. Government is taking some favorable steps for the industry by easing the FDI norms, making some amendments in the Real Estate Bill and introduction of real estate investment trusts and InVITS. Other missions like ‘Housing for All’ and ‘Make in India’ also contribute their share to the Indian economy. Increased amount of FDI will run through the economy which will result in ample job opportunities. All this will ultimately result in excellent demand for residential and commercial real estate. The future of the industry is very bright.
However, such expansion needs much funds. Developers look for alternate investment other than the traditional funds. So, they opt for Private Equity (PE) Funds.
What is PE funding?
PE funding works in a similar way like mutual funds. A fund house raises money from private individuals and then invests the same in different asset classes after much evaluation. Traditional investors either support real estate or debt vehicles. But now, you can invest in a combination of two i.e., the PE funding. It is a structured debt-fund for the developer. This investment caters to the high net worth individuals and has a definite lock-in period as well.
How it differs from mutual funds?
A PE fund differs from mutual funds in terms of frequency of valuation and the size of investment. It comes in different forms such as equity, debt and hybrid i.e., the mix of two. Mutual funds conduct everyday valuation whereas PE funds are valued every year.
How is it beneficial?
Investing in a PE funds will offer you the following benefits:
Appreciation in market value
Interest payout per quarter
Secure investment venture
Personal guarantees from builders
Usually, generates about 20% IRR over the funds
Hence, one should consider PE funds as an alternative investment avenue typically in Tier-I and Tier-II cities. With rapid infrastructure development and improving connectivity, they are poised for tremendous growth. Exercise caution and park your money in a fruitful investment.
Read More About…….….Cabinet Nod to Real Estate Bill: How it Affects Homebuyers?