Hyderabad: TSI Ventures (India) Pvt Ltd, an equal joint venture between US real estate developer Tishman Speyer and India’s largest private equity fund ICICI Venture, plans to raise a second realty-focused fund.
It is part of a plan under which the firm will increase its corpus to around $5 billion (Rs20,500 crore) in the next three-four years from the current $700 million, said Renuka Ramnath, the Indian partner’s managing director.
The size of the second fund, also likely to be equally owned by the two partners as was the first one, has not been finalized “but it will be considerably larger than the existing fund”, Tishman Speyer president and founder Jerry I. Speyer said in an interview. Speyer is here for groundbreaking ceremony of an office project, the first of TSI Ventures’ in India.
“We are upbeat on the Indian realty sector and are currently discussing the proposal to raise second fund, which will take place some time next year,” Speyer said. Both partners will independently tap global investors to contribute to the equity of TSI Ventures, said Kok Huat Goh, the Bangalore-based chief executive of TSI.
More than half of the $700 million currently under management will be spent this year. Together with borrowings, the fund gives TSI Ventures more than $2 billion of spending power. The firm is developing a township project, separate from the Hyderabad office project, costing $2 billion, on the city’s outskirts.
There is a growing appetite for real estate investments in India as the economy expands at over 9%, the second-fastest growing large economy in the world after China. “The need for capital in the Indian realty sector is quite huge. It is the question of investing in the right kind of cities and projects and the challenge is in investing at right valuations,” said Arvind Pahwa, managing director of JP Morgan’s Indian real estate advisory services.
Ever since India eased its rules on foreign ownership in real estate and construction sectors early in 2005, several global property funds have set up businesses: an estimated $10 billion was raised globally for Indian property funds last year. Key players who raised the funds for investing in Indian realty include powerhouses such as Blackstone Group, Goldman Sachs, Citigroup Property Investors, Morgan Stanley and GE Commercial Finance Real Estate.
“Raising funds is not a difficult issue these days keeping in view the global interest in Indian realty sector. But the real challenge lies in addressing the project execution risk associated with the greenfield property development in India,” said Balaji Rao, managing director of private equity firm Starwood Capital India Advisors, which focuses on realty sector.
Tishman Speyer’s senior managing director Katherine Farley said TSI Ventures is currently chalking out a strategy to spread its presence into all the seven main cities of India in the next two-three years but declined to give details.