Indian real estate sector has witnessed dynamic growth in the past few years with considerable flow of capital both from foreign and domestic sources. Funded with public capital and multiple market and product strategies, the realty investor profile now has evolved from local businesses to global corporate organizations. Realty developers too are adapting to the requirements of joint venture arrangements by providing improved transparency and higher professional standards. In addition, as the sustained demand for residential and commercial realty in India offers opportunities for income growth and capital appreciation, UHNI investors are opting for REPE Funds as a preferred asset class for diversified investment.
REPE funds attempt to provide returns independent of traditional asset classes and generally follow core-plus, value added, or opportunistic strategies for investments. Core-plus strategy is a moderate risk/moderate return strategy as the fund will generally invest in core properties while Value Added is a medium-to-high risk/medium-to-high return strategy. It will involve buying a property, improving it and selling it at an opportune time for a gain. Alternatively, Opportunistic strategy is a high risk/high return strategy that involves investments in land development and niche property sectors.
Like any other private equity investing, REPE investment decision too is based on the investment purpose, risk openness, time horizon, diversification and liquidity needs of the investor. Important aspects of the REPE fund itself to be considered include geographic and asset class focus, diversity of the investment structures, methodology for selection and fund’s focus on asset management. The investor also needs to evaluate the REPE Fund’s overall capital structure and the sustainability of earnings.