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Fund Option in Real Estate


Fund Option in Real Estate

Last updated: August 24 2007
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  • Fund Option in Real Estate

    Two-and-a-half years after foreign investments were allowed in the Indian real estate space to mark its aggressive growth, investors are using a variety of investing and funding options to improve their returns from the market.

    Only a handful of overseas investors have ventured to set up dedicated India funds. JPMorgan Chase & Co., Sun-Apollo Ventures Llc. and Trikona Capital, have together raised around $1.4 billion (Rs5,754 crore) for such funds. And General Electric Co. has stated that it will raise a $63 million India real estate fund, although it also uses other funding avenues.

    Other firms such as Citigroup Property Investors (CPI) and Morgan Stanley that have been active in making investments have been using allocations from multi-sector, Asia-Pacific regional funds or proprietary funds. Both GE and Citigroup have been using proprietary funds for investing in real estate projects, while Morgan Stanley has invested through allocations from its Asia-Pacific funds.

    Rupee-denominated investments in real estate over the past two-and-a-half years account for $315 million, compared with $6.3 billion committed by international investors. Of the 114 deals signed and sealed since, only 29 were by domestic funds while 85 were by foreign funds.

    It all depends on the limited partners (people or entities from whom funds raise money) are. Most of the private equity funds raise money from international institutional investors who continue to have a healthy appetite for Indian real estate. The money is coming from a variety of sources across the world: from proprietary funds of banks and other institutional investors, allocations from regional and multi-sector funds raised by the private equity firms, as well as from dedicated India funds for Indian real estate.

    According to DTZ, there are 138 funds and investors sniffing around the real estate sector, with wallets ranging from Rs300 crore to $1 billion (around Rs4,100 crore). Compared with the amounts that have been raised, the investments are much smaller. Hedge funds are another category of investors that have been active in the sector.

    While US-based hedge fund Och-ziff Capital Management Group Llc. bought into Bangalore realtor Nitesh Estates, Caledonia Investments Plc., another US hedge fund, recently bought into Mumbai-based housing finance firm Dewan Housing Finance Corp. Ltd. Real estate has also seen the entry of another kind of investor-the developer-investor-firms such as Hines Interests LP, HRO International and Tishman-Speyers. Tishman set up a joint venture with ICICI Venture, while Hines and HRO have set up their own funds for investing in developments.

    Given the regulatory environment today, it does not make sense to use any route other than the foreign direct investment route. Property consultants Jones Lang LaSalle estimates that $10 billion could be headed for the Indian real estate sector in the next 12-18 months.

    Source: Live Mint
  • #2


    Re : Fund Option in Real Estate

    Foriegn Investors

    Dear John.....the following news doesn't quite agree to this ........

    Foreign investors less keen on Indian real-estate

    Foreign investors are less willing to invest in Indian real estate. Some private equity funds looking to raise money abroad have even shelved fund raising plans.

    Ptarmigan Capital Fund, an India-dedicated fund launched by US-based Ptarmigan Capital LLC in March, could not raise funds from international investors. The fund has now been shelved. Analysts said that the plans to raise more than USD 2 billion have been put off indefinitely in the past six months alone. They said that while weak sentiment in the global realty sector has had its impact, the slowdown in the Indian property market has worsened the situation.

    In India, markets peaked and some crossed the line too early. At the same time, the government came down very heavily on the situation in India. Some of the funds were not able to convince investors that they are able to deploy funds and therefore secure investments were in a difficult position and not able to raise money. There are a good number of those, who have not been able to do so.

    Analysts added that there are too many funds chasing too few good deals. So, funds have been slow in deploying capital and in turn this has affected their fund raising capabilities. They stated that worse affected are the third party funds, especially those launching a real estate fund for the first time.

    Experts commented that funds with the first mover advantage, which have been successful in deploying the money they raised and show good return projections will be able to raise money. But they too will take longer to meet their targets than they did previously.



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