Trikona Capital, currently the single largest real estate fund dedicated to India, is planning to invest $10 billion in real estate over the next 10 years.
Trikona Capital, currently the single largest real estate fund dedicated to India, is planning to invest $10 billion in real estate and infrastructure sector over the next 10 years. Trikona has earlier raised close to $500 million in UK and has commitments worth $1.5 billion in over 14 projects in the country.
Aashish Kalra, managing director and co-founder of Trikona Capital, spoke to Tinesh Bhasin on the real estate industry and how the fund plans to invest in the current scenario.
Give us your views on Reserve Bank of India’s move to curb Foreign Direct Investment (FDI) in real estate.
We need FDI to increase supply of real estate properties. Debt has become expensive as interest costs have gone up. Real estate business in the country is at nascent stage.
The sector has just started witnessing institutional investments and old monopolies are breaking down as companies are selling shares to public. Transparency is seeping in.
We need foreign institutional money to help the sector reach maturity.
As the industry is slowly institutionalising, more access to capital should be made available. FDI will also help the sector mature at faster pace.
But the central bank’s concern is probably with the way the rupee is moving versus the dollar…
Even if FDI is leading to rupee appreciation, I believe it is a good sign for the economy. In past one year, we have more outbound investments than inbound.
Appreciating rupee makes these investments cheap. With oil price rising and rupee appreciating, we get oil cheaper too.
Can the realty sector absorb money flowing through FDI?
FDI is a miniscule part of the entire real estate investments as of now. There have been announcements of institutions raising mammoth amounts to invest in realty.
But the investments have not yet happened. I will be surprised if the actual commitments go over $4 billion. On the contrary, the country requires over trillion dollars in investments.
So what is happening with the money raised, if you suggest that the investments so far are miniscule?
Lot many international private equity funds and real estate companies who raised money have not been able to invest in the country as the sector is unorganised.
Few have left as they thought it is too challenging to strike a deal here. They have concerns with deal size too, as majority of the projects do not require over $100 million.
On the contrary, these big funds can write a single cheque of billion dollars to invest in just one hotel in other Asian countries such as Singapore.
There are reports suggesting FDI in real estate route is being misused. Companies take money to issue shares but use it as working capital and then return the funds without conversion into shares or equity.
It is happening. It is possible that Indian money that was kept abroad is flowing back in the country through this route.
Given a choice, no fund will only lend its money as debt. Debt has low returns whereas as real estate investment offers much higher returns possibility.
Do you expect a correction going forward?
I do not know whether there will be correction but we surely need one. Current prices are unsustainable.
How is Trikona structured and what where will you be investing the $10 billion?
We have eight verticals including infrastructure, urban rejuvenation (slum rehabilitation), retail, residential, commercial, logistics, industrial and hospitality.
The money will be invested in all the verticals. We have 20 million sq ft under construction and scaling it to 100 million sq ft.
How do you plan to raise this money?
Raising money is just a structural issue. We have current commitments of $1.5 billion through the $500 million we have raised. That is because our net present value has reached $2.5 billion.
Lot many options exist for us. We can sell shares to public in India and abroad. We can plough back our current projects’ returns.
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