With the Indian real estate market slated to grow 35-40% in value terms over the next two years, private equity (PE) players are lining up significant investments in the segment. Led by Blackstone and the PE arm of Deutsche Bank, a host of players—including Red Fort Capital Advisors, Starwood Capital and Walton Street—are expected to invest close to $12 billion combined in homes, offices, townships, hotels and other projects.
Red Fort Capital is preparing to invest Rs 3,500 crore, mainly on budget hotels, while Starwood is committing Rs 800 crore to Chennai-based Shriram Properties. Deutsche Bank will help Suncity Projects raise Rs 1,500 crore, and the Blackstone Group has said it would invest around $18 million (around Rs 73 crore) in Synergy Property Development Services. Kuldeep Chawla, director, Red Fort Capital, said, “We will focus on developing a chain of budget hotels by associating with local developers. About 400 budget hotels with 60,000 hotel rooms are expected to come up in India. We will look at investing in a diversified portfolio of properties.”
In 2006,Markets regulator Sebi opened up the real estate market to PE investments. The first year was a learning period. “The following year saw a real correction in the market, with large incremental growth rather than dramatic growth, where stock market money went into special purpose vehicle-level investments,” says Arun Natarajan, founder & CEO, Venture Intelligence India, which tracks the PE segment.
Balaji Rao, managing director, Starwood Capital said, “We are strategic partners with Chennai-based Shriram Properties to develop a 300-acres township in Kolkata, which requires an investment of Rs 5,000 crore. Apart from Starwood Capital, Shriram Properties is also looking at raising funds from Walton Street Capital. Likewise, following its partnership with Synergy, Blackstone Real Estate is eyeing further opportunities here.
Experts say that in calendar 2007 alone, PE players would have invested $5 billion in the Indian real estate sector. But there is need for investments of up to $18-20 billion, which are expected in FY09 and FY10, they say. Says Jayesh Kariya, partner, Deloitte Haskins & Sells, “Investments of $1,400 billion are being made by Real Estate Investment Trusts globally. Hence, more global investors will start looking at Indian realty.”
This investment zeal comes in the backdrop of a much broader enthusiasm that PE players have shown across sectors in India in recent times. According to a .
new study by Boston Analytics, around 903 PE deals worth $24.8 billion were signed in India in the period 2004-07, with more than 45 of those exceeding $100 million. This trend is likely to continue strongly through 2010, driven by robust economic growth and attractive market valuations, it adds.
Source: Financial Express