Mumbai: Two-and-a-half years after foreign investments were allowed in the Indian real estate space to mark its aggressive growth, investors are using a variety of investing and funding options to improve their returns from the market.
Only a handful of overseas investors have ventured to set up dedicated India funds. JPMorgan Chase & Co., Sun-Apollo Ventures Llc. and Trikona Capital, have together raised around $1.4 billion (Rs5,754 crore) for such funds. And General Electric Co. has stated that it will raise a $63 million India real estate fund, although it also uses other funding avenues.
Other firms—such as Citigroup Property Investors (CPI) and Morgan Stanley that have been active in making investments—have been using allocations from multi-sector, Asia-Pacific regional funds or proprietary funds.
Both GE and Citigroup, for instance, have been using proprietary funds for investing in real estate projects, while Morgan Stanley, according to executives in the industry who did not wish to be identified, has invested through allocations from its Asia-Pacific funds.
Research by Real Estate Intelligence, a Mumbai-based real estate deal tracker, shows that rupee-denominated investments in real estate over the past two-and-a-half years account for $315 million, compared with $6.3 billion committed by international investors. Of the 114 deals signed and sealed since, only 29 were by domestic funds while 85 were by foreign funds.
“It all depends on who your limited partners (people or entities from whom funds raise money) are. Most of the private equity funds raise money from international institutional investors who continue to have a healthy appetite for Indian real estate,” says Real Estate Intelligence chief executive officer S. Karthikeyan.
“The money is coming from a variety of sources across the world: from proprietary funds of banks and other institutional investors, allocations from regional and multi-sector funds raised by the private equity firms, as well as from dedicated India funds for Indian real estate, ” says Amber Maheshwari, director investments at DTZ, a real estate consulting firm that tracks such deals.
According to DTZ, there are 138 funds and investors sniffing around the real estate sector, with wallets ranging from Rs300 crore to $1 billion (around Rs4,100 crore). DTZ refused to divulge deal details, but Maheshwari admits that compared with the amounts that have been raised, the investments are much smaller.
Hedge funds are another category of investors that have been active in the sector. While US-based hedge fund Och-ziff Capital Management Group Llc. bought into Bangalore realtor Nitesh Estates, Caledonia Investments Plc., another US hedge fund, recently bought into Mumbai-based housing finance firm Dewan Housing Finance Corp. Ltd.
Real estate has also seen the entry of another kind of investor—the developer-investor—firms such as Hines Interests LP, HRO International and Tishman-Speyers. Tishman set up a joint venture with ICICI Venture, while Hines and HRO have set up their own funds for investing in developments.
“Given the regulatory environment today, it does not make sense to use any route other than the foreign direct investment route,” says Ajoy Kapoor, partner Yatra Capital Ltd, a Mumbai-based real estate-focused fund.
Property consultants Jones Lang LaSalle estimates that $10 billion could be headed for the Indian real estate sector in the next 12-18 months.