Indiareit plans to raise $750 mn overseas

Indiareit Fund Advisors, the venture capital firm controlled by the Piramal Group, plans to raise as much as $750 million overseas for what could become the country's second-largest real estate fund.

The Mumbai-based company may begin tapping investors in the US, Europe, West Asia and Japan by year-end, Managing Director Ramesh Jogani said in an interview yesterday. The fund will invest in companies building apartments, malls and offices in India.

India, the fastest-growing economy after China, may receive as much as $10 billion in overseas funds betting on real estate in the coming two-and-a half years, Indiareit estimates.

Housing Development Finance Corporation (HDFC), Infrastructure Leasing & Finance, and Kotak Mahindra Bank are among the institutions raising money to invest in unlisted developers and projects.

"Demand for space in India seems unending,'' said Raja Seetharaman, associate director at Jones Lang LaSalle Property Consultants in Mumbai. "Investors are looking for a big opportunity in India as the economy is poised to grow at a minimum 7.5 per cent over the next few years.''

Real estate funds focused on India have attracted about $3 billion so far, according to Indiareit, on optimism economic growth that averaged 8.6 per cent over the past four years will power demand for offices, shopping malls and residences.

The country's real estate industry may swell to $90 billion by 2015 from $12 billion in 2005, Moody's Investors Service said in June.

ABN Amro Holding and ICICI Bank helped it raise the money.

London-based 3i Group, Europe's biggest publicly traded private equity firm, invested $40 million in the $200 million, five-year fund Indiareit closed in September last year. That fund might triple during its lifetime, Jogani said.

Indiareit earmarked about two-thirds of the amount raised for its real estate funds to residential projects, seeking to profit from rising demand for homes as salaries rise, Jogani said. India faces a shortage of 25 million houses, according to HDFC.

HDFC, the country's second-biggest home mortgage lender, last month raised $800 million from overseas investors for a nine-year real estate fund, the nation's biggest, exceeding the $630 million drawn by SUN Apollo Real Estate Fund in January.

Kotak Real Estate Fund is raising $350 million from overseas investors in addition to the $500 million it raised locally to invest in houses, offices, hotels and warehouses, Vikas Chimakoorti, a partner at the fund, said last week.

IL&FS Investment Managers and US-based Milestone Capital Advisors yesterday said they planned to raise Rs 1,000 crore to invest in hotels, hospitals, warehouses, offices and houses.

The Piramal Group controls companies including Nicholas Piramal, the nation's seventh-biggest drugmaker by market value. It set up Indiareit in early 2006, Jogani said.