11/4/2015 HNIs lose interest in real estate as startups become hot favourite The Economic Times

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HNIs lose interest in real estate asstartups become hot favourite

READ MORE ON » real estate | private equity | investments | invest | Funding

MUMBAI | NEW DELHI: Stuck investmentsand low returns in India's realty sector areacting as deterrent for investments fromultrahigh networth individuals (HNIs), whoare now making a beeline for the country'sstartup space, where rapid growthpromises to offset losses.

Take the case of Amit Maheshwari, forinstance. Maheshwari, partner at audit firmAshok Maheshwary & Associates, likemany other investors had substantialexposure to real estate, but with price of hisproperties remaining stuck in low gear, hehas now turned his attention to startups.

"Most HNIs have a skewed exposure to real estate, which is changing very fast due tolower returns in the sector and booming returns in the startup space. However,investments in the startups are also driven sometimes by the vanity attached to the angelinvestors these days, rather than just pure economics," said Maheshwari, who hasinvested in two startups in the last few months.

Several hundred startups including Zophop, myPenworld.com, Coveritup.in, Tooney.inand Easybikes.co.in have seen investments from angel investors in the last one year.

A recent ETpoll of 100 randomly selected CXOs in India revealed that as many as six in10 CXOs have invested a portion of their wealth in startups.

"Real estate was the favourite asset class for Indian HNIs. However, due to expectedstagnant returns in real estate going forward, not only are HNIs avoiding investing moremoney into real estate, either directly or through funds, but are also exiting themwherever possible, and now are investing in the upcoming new asset class such asstartups, where the amount invested could be as low as Rs 10 lakh and hence the riskcan be spread across multiple startups," said Jeenendra Bhandari, partner at tax andaudit firm MGB and Co LLP. Bhandari has himself invested in several startups. Accordingto industry trackers, the average investment in a startup is about Rs 1.3 crore, but inmany cases where seedstage funding is involved, it could be as less as Rs 10 lakh. Thisis many because HNIs are also coming together for investment in startups. Many HNIsare creating SPVs or funding vehicles which buy stake in startups against part moneypartadvisory kind of services. Both Maheshwari and Bhandari have invested in startupsthrough investment vehicles.

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11/4/2015 HNIs lose interest in real estate as startups become hot favourite The Economic Times

http://economictimes.indiatimes.com/wealth/realestate/news/hnisloseinterestinrealestateasstartupsbecomehotfavourite/articleshow/49574050.cms 2/5

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Industry trackers said that while earlier aninvestment in a good residential projectwould double in three to four years, thathasn't been the case for the last fewyears. The days of 20% yearonyearreturns, or in some cases abnormalreturns for investors, are gone.

Sandeep Madan, a New Delhibased HNIwho has been investing in property, saidhis investment in real estate has reducedbut money will always seek better opportunities. He has put his bet on two startups in theecommerce segment, but not the plain vanilla variety. "These are two businesses that aretrying to take offline businesses online. For me, putting my money where I can add valueis a better option," Madan said.

According to him, there are several large investors who are put ting money on multiplestartups, but many of them are doing it blindly. "That probably happens because of lack oftime," he said.

Even in the real estate market, Madan said, there are plenty of opportunities today forpeople who are ready to look for them. "You need to cherry pick, but the picking needs tobe very careful with strong due diligence," he said. While investment in a startup may bea punt, for many it is not just about returns. Some angel investors are also attracted to thesector due to the vanity and the media attention an investment attracts, said an angelinvestor.

The philosophy of a typical angel investor is to invest small amounts in a large anddiverse number of startups. Angel investing involves high risk and less returns, saidindustry trackers.

While some HNIs are investing the additional money in picking up stakes in startups,others are going a step ahead and exiting from real estate private equity funds and sellingproperty to fund startups. These newage HNIs are also investing in startups outsideIndia.

Anckur Srivasttava, chairman of GenReal Property Advisers in Gurgaon, said he haslooked at a few startup investing opportunities in recent months. His incrementalinvestments in real estate, though, have reduced as his previous investments havebecome illiquid. "The churning of money has stopped," he said.

Srivasttava points out that returns in real estate haven't really come down but the timelinefor these returns have stretched. Also, with many investors unable to exit their olderinvestments because of the slow market, real estate as an asset class is not looking asgreat. "But smart investors are still investing in the asset class," he said.

A CEO of the real estate fund said he has invested in three startups so far, with anaverage investment of about Rs 25 lakh. "The amount I am investing in real estate hasreduced because of my older investments being stuck and startup is emerging as a newopportunity," he said. "In a nutshell, today no one wants to invest in real estate andeveryone wants to invest in startups. That was not the case three years back."

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11/4/2015 HNIs lose interest in real estate as startups become hot favourite The Economic Times

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11/4/2015 HNIs lose interest in real estate as startups become hot favourite The Economic Times

http://economictimes.indiatimes.com/wealth/realestate/news/hnisloseinterestinrealestateasstartupsbecomehotfavourite/articleshow/49574050.cms 4/5

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11/4/2015 HNIs lose interest in real estate as startups become hot favourite The Economic Times

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