Indiareit Fund Advisors Pvt., a real estate venture capital fund backed by 3i Group Plc, plans to raise about $622 million in three new funds that will invest in Indian property across the nation’s major cities.
Indiareit plans to raise $400 million for an offshore fund, as well as a 6 billion rupee ($133 million) rental yield fund and a 4 billion rupee domestic debt fund in the year starting April 1, Chief Executive Officer Ramesh Jogani said.
“India is a great place to be in, it’s a great story where demographics are right and gross domestic product is growing at 8 percent,” Mumbai-based Jogani said in an interview yesterday. “If you stick to the basics and do it right, I think it’s a great place to make a lot of money.”
Private-equity firms invested about $1.24 billion in 34 deals in India this year, according to a study by Venture Intelligence, a researcher based in the south Indian city of Chennai. That’s a 69 percent increase from the same period last year with 22 investments valued at $735 million, it said.
Indiareit, started in 2006, advises on funds worth about $850 million that invest in real estate in the Indian cities of Mumbai, Chennai, Bangalore, Hyderabad and Pune. 3i, Europe’s largest publicly traded private-equity firm, is a cornerstone investor in Indiareit’s $200 million offshore fund, Jogani said.
Commercial real estate is picking up as rentals have risen and offer returns of 12 percent, compared with residential property, which yields between 2 percent and 3 percent, he said. Mumbai is the fourth most expensive office market in the world, according to a CB Richard Ellis Group Inc. report last month, and New Delhi was ranked 11th.
“I see a huge play for investors and funds in commercial, though no one is ready to touch it with a barge pole as of now,” Jogani said. “I don’t see the oversupply in commercial continuing for long. The supply will be so quickly lapped up that one will feel they missed the boat.”
Jogani expects prices to “correct” in some housing markets such as Mumbai, Delhi and Pune. Indiareit invests in metropolitan cities with about 70 percent invested in residential property and the rest in office spaces.
Indiareit is introducing the new funds at a time when costs at real estate companies are expected to rise after a bribery probe that led to the arrests of eight bank and brokerage executives last month relating to preferential treatment to developers. Property companies may face higher borrowing costs and shrinking access to credit after the arrests, Ambit Capital Pvt. said last month.
Billionaire Ajay Piramal plans to sell his stake in Indiareit, according to a letter sent to investors. Piramal will sell the stake to avoid a conflict of interest with his own real estate development plans, according to the letter obtained by Bloomberg News. The buyer’s identity wasn’t disclosed.
Religare Enterprises Ltd., a New Delhi-based financial services group, is close to buying 85 percent of Indiareit, valuing the fund at 2.5 billion rupees, the Economic Times reported on Dec. 7, citing two people it didn’t identify. Religare said in a statement it hasn’t signed an agreement with Indiareit and that it constantly evaluates opportunities.
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