Mumbai: Shriram Properties Ltd, the property development arm of the Chennai-based Shriram Group, has teamed up with US private equity firms Walton Street Capital and Starwood Capital Group to develop a Rs5,000 crore ($1.25 billion) integrated township on the outskirts of Kolkata, riding on India’s real estate boom.
The private equity firms will pick up 33% each in a special purpose vehicle,
Bengal Shriram Hi-Tech City Pvt. Ltd, which has been set up for the project.
High rise: Residential apartments in Kolkata. The proposed integrated township will be developed on the outskirts of the city.
The township will be built on 20 million sq. ft of surplus land owned by Hindustan Motors Ltd in Uttarpara, Howrah, where the C.K. Birla group automobile manufacturer has a factory. Hindustan Motors, which sells the iconic but troubled Ambassador car, has given development rights to Shriram, Walton and Starwood.
In return, the firm will get a portion of the revenue from the project, the terms of which was not disclosed.
Hindustan Motors shares closed Tuesday at Rs35.95 a share, down 1%, on the Bombay Stock Exchange.
The proposed township will comprise residential, retail, office and civic infrastructure, said a statement.
This is Walton’s maiden investment in India, while Starwood, the other partner, has already invested across residential and hotel properties here. Both specialize in real estate investments globally and are investing in the country out of global funds.
Walton is currently in the process of raising a $2.5-3 billion global fund. It at present manages about $3.5 billion in capital commitments and has recently set up base in Mumbai with a nine-member team. Mumbai is its first office outside the US. Starwood has globally invested about $6 billion since its inception in 1991.
Apart from the Kolkata township, Shriram Properties is also looking at properties in “emerging markets” such as Pune, said M. Murali, managing director Shriram Properties.
Properties in tier II cities such as Kolkata and Chennai have been attracting a lot private equity investments as land and development costs are cheaper in these cities compared to tier-1 cities, such as Mumbai, Delhi and Bangalore.
Sourav Goswami, managing director of Walton Street Capital India Pvt. Ltd, said, “Kolkata is among the most exciting emerging cities in Asia, not just India.”
While foreign direct investment is allowed at the start of projects, Indian regulations bar overseas investment or stakes in fully developed projects or buildings.
Still, a boom in real estate, where prices have tripled in the last three years in India’s top cities, has attracted a raft of players both local and foreign. Indian firms which have vast tracts of surplus land are either developing it themselves or selling it off to cash in on the gains. The conversion of factory land into commercial and residential spaces has created new business addresses in many parts of the country, mostly recently in Lower Parel in Mumbai where land occupied by cotton mills was repurposed for commercial space.