Delhi-based tier II realty player Eldeco Group is in discussions with AIG and Merrill Lynch for raising $200-250 million from a clutch of private equity (PE) investors. As part of the plan, Eldeco has already raised some funds from Xander PE. Sources said group company Eldeco Infrastructure & Properties (EIPL) was in the market for raising funds at the entity and special purpose vehicle (SPV) level for upcoming projects in Ludhiana and Jalandhar, in Punjab, and in two cities in Maharashtra. The company is also looking at raising funds through four SPVs and may be at the holding entity level as well. Mr. NK Ahuja, CFO, Eldeco, said,“We look at raising funds from time to time, but there is no need for us to comment on it”. The company denied it was holding talks with the PE firms, and that it has raised funds from Xander. The move comes after the group’s earlier plans to merge the listed entity Eldeco Housing & Industries (EHIL) with EIPL and raise funds from the capital market was abandoned, sources said. Lucknow-based EHIL is a smaller group company compared to the privately-held EIPL, which has notched up 80%, annualized growth since being incorporated in 2000. EIPL claims that it has developments worth over Rs 3,500 crore across segments. The development comes even as some analysts predicted that PE cash flow into the realty sector in some key markets could be tightening on account of oversupply concerns as well as a slowdown in off take. This includes markets like NCR, Bangalore, Chennai and Hyderabad where there is a growing concern, especially on the commercial space off take, industry observers said. However, there’s a contrary view that more PE funds are being committed to Asian markets, with the outlay for the first time bigger than what is in the pipeline for Europe in 2008. This could see fund action remaining robust in markets like India. Further, developers, which are seeking funds for developments in smaller cities, could be relatively better placed as tier II markets are expected to open up in a significant way for the realty boom.