$3 bn investment may flow into real estate

Nearly $3 billion is likely to become available for investment in Indian real estate over the next 15 month with a slew of joint ventures with international funds and developers on the anvil.

Says Mridul Upreti, head of corporate finance and investment at Jones Lang Lasalle, "From entity level buyouts to joint venture funds and partnerships in developing properties, we see a range of funds coming into India in the next 15 months."

Adds Akshaya Kumar, CEO of Colliers International, "Already half a billion dollars worth of approvals are in place. In the next 24 to 36 months, the funds coming into India could touch anything between $3-5 billion."

Already in the first half of this financial year, transactions have grown 20 per cent year-on-year over the last fiscal, says a Jones Lang Lasalles report.

Most of the investible funds are expected to come from North American investors, European real estate funds and multinational developers from the Asia Pacific region who have been scoping out opportunities in India.

Those eyeing the Indian market include dedicated real estate funds like Tishman Speyers which has tied up ICICI to raise $6 million for a joint VC fund, developers like the Dubai-based Emaar which has just tied up with the Delhi-based developer MGF for half a billion dollars worth projects with a capital outlay of $4 billion. Keppleland has tied up with the Bangalore-based Purvankara developers to develop an IT Park. Singapore based Ascendas has floated a dedicated IT park fund where other funds like GE have invested. GIC of Singapore is developing a residential complex near Chennai.

The Indian Real Estate Opportunities fund has invested an undisclosed amount of Michael Dell's of Dell Computers private wealth in Pune recently.

All this, of course, are in addition to the funds being raised by the Indian financial institutions like HDFC, ICICI and IDFC abroad.

Says Kumar, "The money could go into developing business and IT parks, townships with a majority of the funds going into top 7or 8 cities." Adds Upreti, "Tier 2 cities could also get a chunk of the funds if a tier 1 developer were to bring in a really big project."

The booming Indian real estate sector is reported to be growing at 30 per cent annually. And what makes it even more attractive are the returns - compared to other destinations in Asia-Pacific, yields in India are in the range of 10 per cent with RoIs in the range of 20 per cent. Elsewhere, it is around 7 per cent with returns around 10 per cent.

A quickly maturing market is also adding to the sheen for global investors.

From three years ago when leveraging debt was the extent of the market, to a market where you can exercise a call option, the India real estate market has come a long way.

Says Upreti, "Three years ago the business consisted of leveraging debt for a high networth individual who wanted to invest in property here, today the ma