New Delhi, India: Nearly two dozen US funds are raising $3.5 billion for investments in Indian realty. This is over and above the $2.5 billion invested by overseas realty funds in India to date. Those raising the money include Wall Street powerhouses such as Blackstone Group ( $1 billion) Goldman Sachs ($1 billion), Citigroup Property Investors ($125 million), Morgan Stanley ($70 million) and GE Commercial Finance Real Estate ($63 million). Others raising the money are: JP Morgan, Warburg Pincus, Merrill Lynch, Lehman Brothers, Warren Buffett’s Berkshire Hathaway, Colony Capital and Starwood Capital.
Considering that most US funds had showed no interest in investing in realty in India, their bullish outlook now has surprised many. The answer lay in the policy changes of February 2005 that allowed 100% foreign investments in construction projects with fast-track approvals. But the real attraction is potential investment returns of 25% and more in Indian projects that might be hard to come by in the US and Western Europe today.
One such determined big player is Goldman Sachs. Today there is a sea change in perceptions. For about a year now, Goldman Sachs’s Whitehall Street Real Estate Funds have been exploring the Indian market and checking out potential investment partners. Some time back, the firm announced its plans to invest up to $1 billion over the next two years in Indian private equity, real estate, private wealth management, and other businesses in the country for its institutional clients. A month later, California Public Employees’ Retirement System invested $100 million in a $400-million real estate fund promoted by IL&FS.
What is attracting investors in particular is India’s urban office space market, which is at 60 million sq ft, compared with New York City’s 400 million sq ft or New Jersey’s 175 million sq ft.
Bangalore has 25 million sq ft of office and high-tech space, of which 9 million sq ft was built last year. For investors, this is a glass half-full or half-empty.
Tishman Speyer is among the first US developers to invest in India. Last year, the New York City-based firm formed a joint development company with ICICI Venture Funds of Mumbai that will have a war chest of $2.5 billion. Tishman Speyer and ICICI Venture Funds are bringing in $300 million each in equity and will invest equally in projects. So far, the Tishman Speyer-ICICI Venture Funds combine has signed memoranda of understanding for two ventures in India. One is a $200-million project for residential and commercial development on 42 acres in Bangalore’s prime Whitefield suburb. The second one is in Karnataka’s Devanahalli , where Tishman Speyer and ICICI Venture Funds are buying a 25-acre plot whose final use has not yet been decided.
Similarly, New York-based developer Vornado Realty Trust has teamed up with The Chatterjee Group, a venture capital firm also located in New York. The Chatterjee Group has more than $1.5 billion in investments, including some in Indian real estate development projects and business process outsourcing operations. Vornado’s investments through this partnership are primarily in the booming market for information technology parks in cities like Bangalore, Hyderabad and Navi Mumbai.
Source: The Financial Express.
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