$1.5-bn succour for realtors in FY10

Written by Mona Mehta | Mumbai | Updated: Jan 6 2010, 05:47am hrs
The Rs 70,000-crore Indian real estate sector is expected to see fresh investments to the tune of $1.5 billion in residential deals by exclusive real estate funds in the financial year 2010-11, three times more than the total quantum that such funds invested in FY 2008-09. These funds include Sun Apollo, HDFC India Real Estate Fund, RedFort Capital, ICICI Prudential Infrastructure Fund and Xander Real Estate Partners. The investments will be both in the metros as well as Tier II cities in India and signal a rebound in realty fund activity in the country after a lull in the last 12 months.

While domestic real estate funds among these may commit overall investments of around $400 million, international funds are expected to pump in over $1.2 billion in the real estate sector during the period. Amit Goenka, national director - capital transactions, Knight Frank India Private Ltd told FE, These estimates are based on the total active domestic and international funds and their existing corpus strengths. There are some active domestic players like HDFC, ICICI Prudential Fund, IndiaREIT, Milestone and ASK who are expected to do deals in 2010. The bulk of the funds are, however, foreign, with much larger corpuses.

These and other such funds have recently closed deals with Parsvanath, Godrej Properties and Nagarjuna Constructions, among others. Other real estate companies, which have announced qualified institutional placements (QIPs) and initial public offerings (IPOs) but are yet to complete the process, like Purvankara, Omaxe, Emaar MGF and Ambience, would be looking to now enter into new private equity (PE) transactions for their select residential projects. Besides this, there are a host of Tier II developers in the MMR, NCR and Bangalore region who are in active discussions with PE funds for their various residential projects.

The residential projects are largely centered in Mumbai, Thane, Panvel, Pune, Ahmedabad, Gurgaon, Noida, Ghaziabad, Faridabad, Bangalore, Chennai, Kolkata and Lucknow. These are prime residential centres in India which form the radar for most fund houses. As per the recent rankings based on Knight Frank research, the top 10 most attractive cities to invest in include Delhi, Mumbai, Surat, Bengaluru, Kolkata, Ahmedabad, Jaipur, Chennai, Pune and Lucknow.

International property consultants Jones Lang LaSalle Meghraj (JLLM) recently conducted research on residential markets across India to help identify investment hotspots for retail investors. Abhishek Kiran Gupta, Head - Research, JLLM, said, While abnormally large returns can be found in specific projects throughout the country, we have limited our analysis to Indias seven largest cities due to high residential demand from their large populations, relatively higher transparency levels and presence of premium regional and national developers.

In order to round out our top 10 list, we have also included three additional noteworthy cities which we feel have the potential to provide significant returns to investors.

As for FDI guidelines, most of the funds are foreign domiciled and have to follow the guidelines for the sector. Such funds can invest in any real estate asset class such as residential, commercial or retail so long as the development is spread over 10 acre of land for development or a minimum development of 50,000 sq mts.