Birla Sun Life is set to invest Rs 250 crore in four real estate projects — three in Mumbai and one in Chennai —through its realty-focused fund.
The Rs 1,100 crore real estate fund has already invested Rs 225 crore in the sector and would be making the investment within three months, a senior company official told Hindustan Times.
“We have clocked around 20% return on our investment and hope to do the same with the new investment,” said Shashi Kumar, head, Real Estate Investment Advisory, Birla Sun Life Asset Management. “In Mumbai, the residential projects are in Western suburbs and we should conclude the deals within three months.”
However, sceptics say that a 20% year on year return for investors may not be possible in Mumbai due to steep prices and lower demand at these price points. “Developers are demanding Rs 12,000 per sq ft price in Borivali (west) as of now. So it is not possible that any investor whether PE player or retail should fetch 20% year on year return on investment as prices would not increase that fast from here on,” said a senior analyst with an international real estate consultancy.Meanwhile, the fund is also investing in other cities apart from Mumbai in what is seen as a strategy. The fund-raised from domestic market predominantly invests in new residential segment in the country. According to the company official, the fund is also bullish on other cities like Pune, Bangalore and Ahmedabad.
Industry experts are wary about investment in real estate especially in Mumbai, where prices have gone up by as much as 40% since 2010. This is only lower (in percentage term) than Ahmedabad, where prices have increased by over 60% in the same period.
“The investment in the real estate is slow in Mumbai because there are no approvals from the government. Also a lot of ambiguity surrounds some laws like floor space index (FSI) and also how the government itself is selling land parcels at steep prices, pushing the prices up,” added Kumar.