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Alternate Investment Market - realtor's paradise


Alternate Investment Market - realtor's paradise

Last updated: December 8 2006
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  • Alternate Investment Market - realtor's paradise

    Alternate Investment Market (AIM) of the London Stock Exchange has lately served as the meeting ground of Indian real estate companies, seeking piles of cash to fund their projects, and foreign investors, eager to get their fingers in the realty pie.

    AIM is turning out to be just like what Nasdaq was for technology companies in the late 90s and early 2000s. However, the regulations on the AIM are far more flexible compared with those on the Nasdaq, making it easy for real estate firms to chase their billion-dollar dreams.

    Raheja Corp was the first Indian developer to raise capital and has now been followed by Hiranandani and Unitech. Companies looking to raise capital on AIM do not need to have a 3-year track record. As a result, real estate companies can form SPVs, which will execute the various projects. These SPVs are then listed on the AIM, and raise capital from foreign investors. This allowed Noida Toll Bridge, an SPV responsible for the Delhi-Noida bridge, to get listed on the AIM.

    AIM, essentially, allows overseas investors to pick exposures in projects where 100% FDI is allowed. FII holdings in real estate companies are capped at 26%, though some companies have raised it with permission from RBI.

    The SPV route seems to be the preferred approach for Indian construction companies. It enables them to raise cash without diluting equity in the main company. Moreover, many foreign investors may not be comfortable taking an exposure to the balance sheet of Indian developers, say sources in the investment banking community. Investing in a specific project solves the problem. Also, a listing on the AIM ensures a more diversified investor base.

    Indian realty first figured on AIM earlier this year, when a private equity fund called Eredene raised $100 million, focussing on real estate projects in Tier-II Indian cities. This was followed by another private equity fund, Trinity Capital, which raised $500 million for the same purpose.

    Source: Economic times
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