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HDFC realty fund to exit Bangalore IT SEZ

HDFC realty fund to exit Bangalore IT SEZ

Bangalore: Realty fund HDFC Property Ventures Ltd is selling its investment in a technology export zone in Bangalore back to the developer, making its fifth exit in recent months.

The sale will earn the fund returns of 490 crore on the 210 crore it invested in Manyata Business Park, an information technology (IT) special economic zone (SEZ) in north Bangalore, less than five years ago, said an executive of HDFC Property who is briefed on the matter.

The IT zone, home to firms such as International Business Machines Corp., is a joint venture between HDFC Property and Embassy Property Developments Ltd, a Bangalore realty firm that specializes in office space.

HDFC Property’s exit from the venture will be complete by mid-April, the fund executive said.

“It was an excellent investment for us where the developer has delivered well, with 7.5 million sq.ft. already leased out in the (12.5 million sq.ft.) SEZ," the executive said on condition of anonymity. “However, the liquidity situation is tight in real estate and there may be a slowdown in exits for a temporary period."

Embassy Property did not respond to an email sent on Tuesday.

HDFC Property, the realty fund of India’s largest mortgage lender Housing Development Finance Corp. Ltd, had put up for sale six office properties in which it had invested about four years ago, as it prepared to return money to investors, Mint reported in January.

HDFC’s domestic fund manages about 1,000 crore of assets.

The fund’s previous exit was from Embassy Golf Links, an office property in Bangalore. The sale to a clutch of wealthy individuals earned it returns of 220 crore on an investment of 51 crore, the fund executive said.

Analysts said HDFC Property’s recent exits were triggered by the quality and rental yield of its assets across property markets.

Office properties are finding more buyers as these are beginning to generate substantial rental income, said Ambar Maheshwari, head of investment advisory at DTZ International Property Advisors Pvt. Ltd.

“We will continue to see a combination of buybacks and secondary sales, where funds exit by selling their stake to another fund," said Maheshwari.

Bangalore, India’s technology hub, is seeing an increase in demand for space in dedicated export zones as many blue-chip IT companies are actively expanding their offices to keep up with a growing economy.

There is limited ready-to-move space in these zones but a significant supply addition is expected in Bangalore by mid-2012, BNP Paribas Real Estate Research, India, says in its latest report.

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