Mumbai: General Electric (GE) Co India is stepping up its real-estate financing in India at a time when concerns about overheating in the sector have prompted the government as well as the Reserve Bank of India to try and curb the flow of money into commercial and residential construction.
“We are looking to put to work $2 billion (Rs8,200 crore) in debt and equity across all types of real estate in India: residential, retail, townships and special economic zones (SEZs),” said Tejpreet Singh Chopra in a telephonic interview earlier this month, ahead of being named the new chief executive officer for the American conglomerate's vast and rapidly growing India operations.
GE said on Monday that the 37-year-old Chopra will take over on 1 June from Scott R. Bayman, who has been GE’s India CEO for 14 years.
“GE, through our real-estate group in GE Commercial Finance, is one of the largest real-estate financiers with assets of $54 billion around the world. This division which operates in 24 countries has seen a 28% compound growth annually since 1997. We are now looking to expand this group in India beyond the joint venture we have with Ascendas Pte Ltd in India for development of IT parks,” said Chopra.
GE Commercial Finance, therefore, intends to provide private equity to developers of commercial real estate; enter into joint ventures for development of projects and provide funding for development via debt as well.
“We will invest in equity of developers or enter into joint ventures with them (for specific projects),” said Chopra. “Retail will be very big as will townships and SEZs in our investments. We can provide, through our other divisions, everything from captive power solutions, security and lighting systems, electricity distribution and water treatment plants for SEZs. We, therefore, see real estate as a fairly large part of our India business.”
The investment in such projects would potentially allow GE a preferential role in also selling more of its equipment, especially from its infrastructure division.
GE expects real estate, which formed a small part of its $1.9 billion revenues in 2006, to comprise a fairly large part of its targeted $8 billion of revenues in 2010.
GE Commercial Finance Real Estate was one of the earliest foreign real-estate investors in India having invested $63 million in the Ascendas India IT Parks fund that owns the landmark International Tech Park Bangalore. “This fund has now grown to Singapore $350 million (Rs932.15 crore) with stakes in the ITPL Bangalore, the ‘V’—a tech park in Hyderabad (earlier known as the Vanenburg IT Park) and the 5.4 lakh sq. ft International Tech Park Chennai amongst others,” says Jonathan Yap chief executive officer of Ascendas Property Management Services (India) Pvt. Ltd.
The joint venture fund will focus on developing and owning IT parks in India and plans to grow from the 2.6 million sq. ft of original space to a fund size of $500 million over the next five-odd years.
Meanwhile, GE “will focus our real-estate efforts on the big mega metros in phase one and over time other tier II cities will be considered as well,” said Chopra. GE, which is now building on the success of its Ascendas joint venture fund in India, plans to take both majority and minority stakes in strong regional developers.
“We will look at $10 million (and up) as we have the ability to write bigger cheques up to $100 million,” Chopra added. The focus will be on infrastructure projects including townships, SEZs and equity investments will be preferred over debt, he said.