The new breed of HNIs today are exploring and investing in a whole new range of asset classes. They are channeling their wealth into start-ups, unlisted companies, commodities, gold ETFs and art. With increasing exposure to global trends, real estate in India is fast emerging as an alternate investment class.
Some of the reasons for rising popularity of private equity in real estate, especially among institutional and HNI investors, include growing demand for real estate, high returns offered and the optimal risk and return ratio. Thus, in spite of limitations such as relatively higher risk and returns dependent on the performance of the broader real estate market, realty private equity (PE) fund has experienced huge growth in recent years.
Some of the advantages associated with realty PE are:
- They generate returns from the real estate market without the risk of locking funds in one property.
- The funds tie up with developers, buy stakes in their projects and are typically development based.
- Investor releases investment amount in tranches, as the fund finds new investment opportunities.
- The risk is spread out with funds invested in projects across locations.
- Potential benefits of annual returns is often in excess of 20%.
Not surprisingly, as per wealth management experts, though the HNIs in India are under-invested in alternative assets, PE, real estate funds, realty investment trusts and global investments are some of the asset classes, expected to witness huge growth in the next decade.