Private equity investment in India's real estate sector declined by around 20.2 per cent

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to $831 million (about Rs 3,740 crore) in the first five months this fiscal due to sluggish demand.

Factors like the tight availability of funds with PE players and delays in project execution prompted fund houses to adopt a cautious approach toward the real estate sector, according to data compiled by research firm Venture Intelligence.

PE players had pumped $1,041 million (around Rs 4,685 crore) into the realty sector during the April-August period of the previous fiscal, as per the data.

"Funding through the PE route is lower compared to the previous year, as fund houses are cautious about investing into realty due to a dip in general demand and uncertainty over timely completion of the projects by developers," said the Chief Executive Officer of Fire Capital, Om Chaudhry, while commenting on the data.

The lower availability of funds with PE players was another reason behind the dip in investment figures, he said.

Chaudhry also said repayment of funds raised during 2006-07 was likely to have reduced the corpus available with the fund houses.

"A lot of funds, which were raised during 2006, are due for return to investors in this year," he said.

The real estate sector is also suffering on account of declining flows from commercial banks and tightening of provisioning norms by the Reserve Bank.