Realty may witness a deep correction

MUMBAI: Tough lending norms, an unfavourable primary market and subprime woes may squeeze the money flow to the domestic property market. Real estate deals are expected to slow down and fancy valuations projected by developers could witness a deep correction, industry officials said. "Our recent experience is that valuation expectations for deals have moderated.

Developers have been increasingly willing to negotiate on terms and conditions, including controls, percentage of divestment and valuations, for SPV-level investments," Sourav Goswami, managing director of Walton Street Capital India — a leading US based real estate fund — said.

Given the investor apathy for IPOs, developers may have to knock the doors of private equity (PE) investors. Nitesh Estates chairman Nitesh Shetty said, "On a fair valuations, the PE firms are keen to struck deal with the developers. Properties with clear titles, right location and time of delivery are the crucial parameters of the PE funds. If these terms met, valuations may not a issue." Nitesh Estates had struck three large scale PE deals in the past two years.

"Global uncertainty on the capital flows would also have its impact on the investment scenario in the Indian market. This would in turn affect deal values and values in the real estate sector in the short term attest," Balaji Rao, India head of Starwood Capital — one of the largest real estate and hospitality fund in the US — said.