Individual investors may no longer be able to invest in real estate through the venture fund route. Real estate venture capital funds have put new domestic funds on hold after being brought under the tax net in the budget. This could leave Indian individual investors with no choice but to enter the property market directly reports CNBC-TV18.
Domestic real estate venture capital funds were fast becoming an attractive vehicle for high networth individuals (HNIs) to invest in property and reap high returns.
This door may now be shut with real estate funds putting new domestic funds on hold.
TCG real estate's India property fund which had so far raised only foreign money was planning to float a 750 crore domestic fund. This fund, which was meant to cater to the high demand from HNIs has now been put on hold.
'A lot of individual investors or HNIs are looking for professional channels to invest their money. In our case there were several leading commercial banks and investment banks who came to us and said that they have a huge database of clients who they manage wealth for, and a certain part of their portfolio they want to allocate to real estate. For that they needed a vehicle and the vehicle would have been domestic funds but after the budget the doors have been more or less shut on that,' says Aanandjit Sunderaj, Chief Investment Officer, India Property Fund.
Domestic venture capital funds have raised more than one billion dollars in the last 18 months. Over 40% of investors in domestic funds were HNIs. Property funds say that post the new tax regime, it will be unviable to raise domestic funds.
Moreover, individual investors investing in these funds may get a raw deal. Real estate venture capital funds will now focus on raising foreign money, leaving Indian investors high and dry. Individual investors who are keen on including a piece of real estate in their portfolio are now likely to invest directly.
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