Indian private equity firm IL&FS Investment Managers Ltd has raised $895 million for a new realty fund, tapping global investors despite the global financial turmoil and falling property markets.
The firm, one of India's oldest private equity players, is also pulling money together for the first tranche of an Asia infrastructure fund, which it hopes to close in about a month, Archana Hingorani, chief executive told Reuters in an interview.
The realty fund, the second IL&FS fund focussed on the real estate sector, exceeded its initial target of $750 million. It has commitments from two sovereign wealth funds, U.S pension funds and university endowments, she said on Tuesday.
“The current market situation and capital scarcity provide valuable opportunities,” she said. “We are of course leaning towards residential and office space. We are not bullish on retail at the moment.”
Real estate demand in India has slackened, first due to high interest rates and prices, and then as tightening credit and an economic slowdown hit demand for homes and office space, while a supply glut has hurt retail.
“We expect to deploy the funds over the next 18 months,” Hingorani said, adding the real estate sector may take longer than 18-24 months to emerge from the slowdown.
IL&FS has already made four commitments worth between $25-50 million each in residential and industrial projects, she said.
IL&FS has fully deployed the $525 million it raised under its first real estate fund in April 2006, and some of the projects are nearing the divestment stage, she said.
Despite the crisis ravaging financial and real estate markets across the globe, firms have managed to raise private equity for Asian property. In October, Merrill Lynch raised $2.65 billion to invest in Asian real estate, including India.
Citigroup is raising a multi-billion dollar follow-up to a $1.3 billion Asia fund, which it has been spending mostly in China and India, and JPMorgan plans to invest more than $1 billion in Asian property.
INFRASTRUCTURE FUND
IL&FS launched an Asian infrastructure fund in the second quarter of 2008 and expects to close the first tranche in about a month, Hingorani said, without elaborating on the size of the tranche. The eventual size of the fund would be $800 million, she said.
“This market is different from earlier,” she said, referring to the impact of the global credit crisis.
“We are close to a first close. It should happen shortly.”
The Indian government has said the country needs about $500 billion to upgrade its overburdened infrastructure, including roads, bridges, rail lines, ports and power plants, with about 30 percent of the funds expected to come from private sector firms.
Top lender State Bank of India and Australia's Macquarie plan to jointly raise a $2 billion infrastructure fund, and private equity firm Blackstone last month said it was considering an infrastructure fund.
IL&FS, established in 1989, has raised 9 funds so far and manages about $1.9 billion.
Source: Reuters