InFocus | India
Realtors' dreams come true
The outsourcing boom is creating a huge demand for commercial and office assets in India.
- By Rajendar Menen, Gulf News Report
- Published: 00:00 August 14, 2006
- The city of Mumbai…the booming Indian real estate sector is reported to be growing at 30 per cent annually.
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Money is pouring into the Indian real estate sector. From foreign and domestic funds, banks and individuals, everyone is queuing up for a piece of the expanding real estate pie.
The foreign direct investment in the sector alone is expected to be about $16 billion over the next five to six years. The newest entrants are the ultra-conservative pension funds from the US.
Real estate developers are excited about the new projects. From Special Economic Zones and townships with high-class luxury apartments priced at Rs100,000 per square foot and swanky commercial office spaces to IT parks and mega malls, the Indian realtor's dreams are coming true.
According to Anthony Ryan, head of real estate investment banking for Asia Pacific at JP Morgan, "The outlook for India is very positive. The rapid GDP growth is very favourable for the housing sector and the outsourcing boom is creating huge demands for commercial and office assets." By 2010 the real estate sector is expected to grow from $12 billion to $50 billion.
US-based Warburg Pincus, Blackstone Group, Broadstreet, Morgan Stanley Real Estate Fund (MSREF), California Public Employees' Retirement System (CalPERS), Hines, Tishman Speyer and JP Morgan Partners have expressed a desire to invest in India. Warren Buffet's Berkshire Hathway has also expressed interest.
A group of NRIs has raised $150 million under the Indian Real Estate Opportunities Fund for projects in India. About $3 billion will be available for investment in Indian real estate over the next 15-month period with a slew of joint ventures with international funds and developers.
According to Mridul Upreti, head of corporate finance and investment, 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." 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 billion to $5 billion."
Early bird investors include the Singapore-based Lee Kim Tah and Ascendas, Dubai-based Emaar, Australia's Macquarie Bank and Keppel Land, and Farallon and GE from the US. Farallon has invested in a joint venture with the Mumbai-based India Bulls, while GE has invested in the IT park fund floated by Ascendas.
Others who have committed funds to the Indian market are the Malaysian IJM group, Indonesia's Universal Success Enterprises and Ciputra Salim Group.
Money is expected from North American investors, European real estate funds and multinational developers from the Asia Pacific region. Others include dedicated real estate funds such as Tishman Speyers, which has tied up with ICICI to raise $6 million for a joint VC fund; developers such as the
Dubai-based Emaar, which has just tied up with the Delhi-based developer MGF for half-a-billion dollars for projects with a capital outlay of $4 billion; and Keppleland, which has tied up with the Bangalore-based Purvankara developers to develop an IT Park. GIC of Singapore is keen on developing a residential complex near Chennai and The Indian Real Estate Opportunities fund has invested an undisclosed amount of Dell Computers' Michael Dell's private wealth in Pune recently. T
his is in addition to funds being raised by financial institutions such as HDFC, ICICI and IDFC abroad.
The booming Indian real estate sector is reported to be growing at 30 per cent annually. The returns are attractive.
Compared to other destinations in the Asia-Pacific, yields in India are in the range of 10 per cent with returns on investment in the range of 20 per cent, double the returns in the rest of the region.
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