15 venture funds to invest in real estate

Around 15 venture funds from the US and Southeast Asia will be making investments in the Indian real estate sector through the FII route. The average ticket size of the investments likely to be made by these funds is around $200-250 million.

Funds that are presently making enquiries on investing in the real estate sector in India include the Blackstone Group, Berkshire Hathaway, JP Morgan, CalPERS, Lehman Brothers and GIC, according to a report by real estate consultant Jones Lang La Salle.

Eight to ten venture funds both from India and overseas have already announced plans to foray into the real estate sector.

The funds include big names like ICICI and the US based Tishman Speyers, Ascendas, GE of Singapore and US, HDFC, US based IREO, Fire Capital, an India based fund, Morgan Stanley, Merrill Lynch, New Vernon, and the US based Xander.

With the entry of 15 more funds, the total size of foreign investments in the Indian real estate sector will increase to $5 billion. According to Lang Salle, the objective of the existing funds varies as both investors and developers are setting up these funds.

Ascendas IT Park Fund and ICICI-Tishman Speyers will develop real estate, whereas HDFC Fund and Fire Capital are likely to be pure vanilla investors.

IREO has formed a SPV with a local developer in Pune in which it would hold 25 per cent to 35 per cent equity and finance the balance by extending a loan at 4 per cent per annum for 15 years. It plans to increase its stake in the SPV by converting the soft loan into equity in a phased manner.

Singapore based Keppel Land and Indonesia based Salim Group have entered India after the relaxation in FDI norms in real estate by entering into joint ventures with local developers or corporates.

UAE based Emaar Group has also tied up with MGF Group to develop properties across India. This apart, hotel chains like Accor and Four Seasons have also entered the country through management contracts with real estate developers.