Bangalore: Morgan Stanley Real Estate Investing managing director Naresh Naik has resigned to set up a real estate fund house that will invest exclusively in India.
Naik, who worked with Lehman Brothers India before joining Morgan Stanley three years ago, is collaborating with Robert Naso, managing director and head of asset management, Asia Pacific, Morgan Stanley Real Estate, for the venture.
New venture: Naik’s fund will focus on residential and commercial office space ventures in large cities. Photo: Saanskrut Kumar/Mint.
Naik confirmed his resignation over the telephone from Mumbai.
Both Naik and Naso, who is based in the US, are on gardening leave—usually a three-six month period of leave when an employee after resignation continues to be on the payroll of the company and is not allowed to join elsewhere.
The new fund, to be headquartered in Singapore, will focus on residential and commercial office space ventures in large cities including Mumbai, Delhi and Bangalore.
Indian real estate companies are increasingly turning to private equity funds to raise money for construction or to pay for land as banks—their biggest source of capital—have tightened lending to the sector.
But these funds, too, are facing challenges in finding investors. Mint recently reported that some half a dozen funds that have been scouting abroad for about a year to raise between $200 million and $700 million (Rs 982 crore and Rs 3,437 crore) each are finding it difficult to do so.
Morgan Stanley headquarters in New York. Photo: Bloomberg.
This is the second big overseas fund-raising initiative for the sector. In 2006-07, domestic real estate funds got commitments for $8-10 billion, of which about $5 billion made its way to the Indian market.
Naik is raising two funds. The first is a $300 million overseas fund, for which he has secured commitments for about $100 million. This fund will invest only in projects compliant with India’s foreign direct investment norms.
The second is a domestic fund that has secured commitments for about $75 million. The size of the fund wasn’t disclosed.
Property analysts say raising money within India is a surer bet than from wary foreign investors.
“In the current scenario, when fund-raising is very difficult both in India and outside, entrepreneurs planning to start a fund would surely do after getting some assurance from their investors,” said Ambar Maheshwari, managing director, corporate finance, Jones Lang LaSalle, a property advisory.
Morgan Stanley Real Estate has invested around $750 million across 10 deals in India, but has not made any fresh investments in the past three years.
Among the deals are an entity-level stake in Mumbai-based real estate firm Oberoi Realty Ltd that Morgan Stanley picked up for about $150 million and an investment in a project of Pune-based development firm Panchshil Realty.
“The concern is that Morgan Stanley has largely been in the asset management mode in India lately and under Naik no new investments were made,” said another analyst, who didn’t want to be identified. “There is also place for new entrants who will bring in transparency and good corporate governance skills into the sector.”