The fund aims to buy land to build apartments and hotels in India as early as June, said Hansoty, who left Citigroup Inc.’s real estate asset management unit in November. Hansoty said he will set up his company in Mumbai and may relocate from Hong Kong after he stops accepting new money from investors.
Hansoty aims to take advantage of increasing demand for housing in one of Asia’s fastest growing economies. Eight funds are raising $1.6 billion to invest in India, London-based research firm Preqin Ltd. said in a November report, while an estimated 38 million homes are needed in the nation of 1.2 billion people by 2030, according to San Francisco-based McKinsey Global Institute.
“Home ownership is extremely low in India,” said Hansoty in a telephone interview from Hong Kong yesterday. “There is significant demand that is going to come online in the future for housing needs.”
Development projects will be done with joint-venture partners who would be responsible for building the apartments and hotels, Hansoty said.
Total real-estate transactions in India rose 17 percent in the nine months ended Sept. 30 from a year earlier, according to Real Capital Analytics Inc., a New York-based property-data provider.
The fund will seek to develop hotels and buy existing ones amid rising demand for business and leisure travel in the country, Hansoty said.
Fairmont Raffles Holdings International plans to add six hotels under its Swissotel brand in India in the next five years to tap the growing demand for business travel in the country, Aiden McAuley, vice president of Asia-Pacific region for Swissotel Hotels & Resorts, said Nov. 22.
The occupancy rate for hotels in India rose 7.8 percent last year because of domestic demand, according to a report by HVS, a global hospitality consultancy. Revenue per available room more than doubled to 4,177 rupees ($91) from 1,889 rupees in the last decade, the report showed.
The segment that offers the best opportunity is the one for hotels in the $100 to $150 per night price range because they never existed in India until recent years, Hansoty said.
‘Plenty of Opportunity’
“In that segment, there are very few hotels which have branded, meaning you have a recognized brand which one can relate to and have a chain of these hotels across India,” Hansoty said. “Given the size of the country, there is plenty of opportunity to do that in multiple cities.”
While with Citi Property, Hansoty invested in five hotels in India under the Aloft brand, part of White Plains, New York- based Starwood Hotels & Resorts Worldwide Inc., he said. Two were completed this year and the rest are due to be completed next year, he added.
The fund may also invest in real-estate companies that have recently been listed and haven’t performed well, and developers whose shares had dropped, Hansoty said.
“There may be some opportunities to go back and work with those companies to recapitalize their balance sheet,” he said.
The Bombay Stock Exchange Realty Index, which tracks the nation’s 13 developers, rose 3.2 percent as of 10:46 a.m. local time, compared with a 1 percent gain by the benchmark Bombay Stock Exchange Sensitive Index.
The Bombay Stock Exchange Realty Index dropped 22 percent in November to the lowest in more than a year. Stocks were weighed as India’s Central Bureau of Investigation probed whether preferential treatment was given to developers.
Betting on Growth
Only two out of five Indian real estate companies that listed their shares since the beginning of this year traded above its opening price, according to data compiled by Bloomberg.
The fund, which has a target return of about 20 percent, will have a three-year investment period and aims to exit the investments over the following five years, Hansoty said.
India’s gross domestic product expanded 8.9 percent in the three months ended September from a year earlier, exceeding 8 percent growth for a third straight quarter, a government report showed yesterday.
“When we look at the GDP growth for India, there are probably very few countries in the world which are growing at a rate of about 7 percent in an economy that is sizeable enough to have an impact,” said Hansoty, who oversaw property investments in Asia worth about $3 billion at Citigroup, Morgan Stanley and The John Buck Company. “Here is a market where you have everything sitting at the right place if you are looking for long-term growth.”
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