New Delhi: A United Arab Emirates- based project development company, Rakeen, and Chennai-based mining firm Trimex Group plan to jointly invest up to $5 billion (Rs19,850 crore) over five years in the Indian real estate market to develop various projects in one of the fastest growing economies in Asia.
Rakeen, promoted by the government of Ras Al Khaimah in the UAE, has partnered with Trimex to form a 50:50 joint venture company known as Rakindo Developers Pvt. Ltd.
Rakeen has already invested $100 million in India and will invest another $100 million in the next few months. Rakindo will raise the $5 billion through a mix of debt and equity.
As borrowing in the overseas debt market is not allowed for Indian developers, the joint venture company will raise funds in India, Prasad Koneru, managing director, Rakindo Developers, said.
The $5 billion investment by Rakindo would be one of the largest investments in the Indian real estate market by a company based overseas. In 2005, Emaar MGF Land Pvt. Ltd, a joint venture company formed by Emaar Properties PJSC, Dubai’s largest real estate company, and MGF Development Ltd of India invested around $1 billion in the Indian real estate sector.
Foreign companies are looking to enter the Indian real estate market as the sector is growing at more than 30% every year compared with markets such as the US where defaults on home loans are slowing the real estate market. The return on investment in the Indian real estate market is also one of the highest in the world at between 25% and 30%.
Rakindo plans to develop 50 million sq. ft of residential, commercial and office space over the next seven years in tier II or smaller cities in southern India.
“We would prefer to develop properties in tier II cities in South India as the large cities are congested,” Koneru said. The company already has more than 4,000 acres of land bank across the country. It didn’t say how that land was acquired.
Rakindo said it is in the process of acquiring an additional 5,000 acres. If it manages to, Rakindo’s land bank would put it in the same league as some of India’s largest developers such as DLF Ltd (in June, the company had about 10,225 acres).
Trimex Group is a mining firm that processes and supplies industrial raw minerals to oil-well drilling, ceramic, glass, construction and fertilizer industries in India and West Asia. Trimex already has an existing relationship with the government of Ras Al Khaimah through RAK Minerals and Metals, a joint venture company of Trimex and RAK Ceramics promoted by the Ras Al Khaimah government.
Rakindo will begin its India operations in the first quarter of 2008 with a $1.5 billion integrated township and special economic zone project in Coimbatore.
The township, spread over 1,000 acres, is being developed in partnership with the Tamil Nadu government. The joint venture has already received in-principle clearance for the special economic zone from the ministry of commerce.
Rakindo also plans to build a first of its kind marina outside Chennai on the East Coast Road to Puducherry in Tamil Nadu. A marina is a boat basin that has docks, moorings, supplies, and other facilities for small boats.
The marina will have resorts and luxury apartments. The company will also be building infrastructure facilities in the marina. “We need to build a causeway and other facilities in the marina,” Koneru said. “The marina will be like a mini port of 3.5km.”
The company has been working on this project for a year now. “The project requires some environmental clearances, which is taking time,” Koneru said. “We will start planning the project by the end of 2008.”
The company is looking at more such marina projects in India.