Garnet, Sternon join hands for overseas ventures

The BSE-listed Garnet Construction and the Dubai-based Sternon Group are planning a 50:50 joint venture to develop properties in Europe, with a prime focus on Sweden, and Mauritius, off the African coast.

Under the JV, Garnet will develop properties and Sternon Group, which has offices in Dubai, UK, USA and India, will market the projects globally. Initially, both companies have plans to invest $ 5 million each and scale up investment according to project requirements.

"For funding requirements, the JV may even go for overseas listing of a wholly-owned subsidiary to be set up for the purpose. We can even tap AIM of the London Stock Exchange," said Arun Kumar Kedia, director (marketing), Garnet.

The Swedish project may add 20-25 per cent to the bottom line of the Garnet, and the Mauritius project was likely to add another 30 per cent to the bottom line, Kedia said.

With the JV, Garnet will join the likes of Maxwin Ansal Ltd which has developed properties in Thailand. Maxwin Ansal is a JV between Ansals and Maxwin Construction Co Ltd, Thailand. Polo RAK Amusements LLC, a JV company between Indian firm Polo Amusement Park and RAK Investment Authority and RAK Properties, is promoting Rs 964.7 crore theme park in Ras Al-Khaimah (RAK) in the UAE.

Another listed firm DS Kulkarni Developers is developing projects in New York and New Jersey.

The Sternon Group, which has customers in 28 countries, recently entered into a three-year global marketing tie-up with Garnet Construction to market the projects of Garnet. The Sternon Group will invest between $ 22 million and $ 25 million in the projects of Garnet over the next five years.

The first project to be developed under the tie-up will be the 400-acre residential-cum-commercial township Magic Hills near Panvel in Navi Mumbai. Sternon has invested $ 4 million in the project. The total valuation of the project is Rs 1,200 crore. Sternon has also invested $ 4 million in Garnet's Rs 800-crore residential project in Nashik.

On the reasons behind investing in Indian realty, Hussaini F Nalwalla, managing director, Sternon Real Estate, said: "We have been active in the real estate business in the US, Dubai and Australia, and we have successfully sold several units over the past fifteen years. The annual returns in these countries is around 12 per cent, while in India they could be around 18 per cent to 20 per cent per annum. We expect Indian realty to boom further in the next 3 to 4 years, and yield returns between 40 per cent to 60 per cent."

Garnet Construction is also planning to raise $ 60 million by way of foreign currency convertible bonds (FCCBs) or preferential bonds or private placement from qualified institutional buyers to finance its new projects, including Magic Hills.

On the rising interest rates and slowdown in the realty, Kedia said: "The overseas property market is not much affected by fluctuations in interest rates. The majority of buyers go for the property with their own funds than on credit. Moreover, we also expect rental values to go up significantly as mortgage rates have been going up, providing a further incentive to NRIs to put their money in India."

Sternon is also promoting an exclusive apartment project in Dubai International City, scheduled to be completed by 2007.