There was nothing better to validate the attractiveness of the infrastructure and real estate sectors in India than a slew of announcements made by private equity players
MUMBAI: There was nothing better to validate the attractiveness of the infrastructure and real estate sectors in India than a slew of announcements made by private equity players on Monday.
While two funds committed themselves for a longer term play in the Indian real estateinfrastructure space, another global fund made its first real estate investment in India.
Going by that, and already announced plans from other private equity majors, real estateinfrastructure could be as hot a sector this year as it was last year, the global credit squeeze notwithstanding.
Data from Grant Thornton reveal that of the $19.03 billion worth of private equity deals done in India in 2007, $6.76 billion or 35.5% was accounted for by the real estateinfrastructure sector.
On Monday, Deutsche Bank, announcing the India launch of RREEF Alternative Investments (RAI), its global asset management platform for investing in real estate, infrastructure and private equity funds, also said it is committed to investing $1 billion in Indian real estate and infrastructure sectors over the next three years.
Meanwhile, local player Axis Private Equity announced the first closure of its Axis Infrastructure Fund at Rs 600 crore ($150 million), saying that the eventual target will be Rs 2,000-2,400 crore ($500-600 million).
Then there was Blackstone, which manages real estate assets worth $132 billion globally, which announced its first real estate deal in India. It said it picked up a minority stake in Bangalore-based Synergy Property Development Services for $18 million.
Why this rush towards Indian real estate and infrastructure?
According to estimates from ICICI Securities, the Indian real estate market is worth $57 billion, and is expected to grow at a compounded annual rate of 13% to touch $105 billion by 2012. This would require investments worth $85 billion across the residential, commercial, retail and hospitality sectors. On infrastructure, the Indian government has forecast the need to spend $492 billion over the XIth five year plan ending 2012.
As such, the investment climate for this sector has been hot, and funds, both domestic and global, have been queuing up for a slice of the action.
While 3i recently closed a $1.2 billion India-dedicated infrastructure fund, others such as IDFC Private Equity, the State Bank of India-Macquarie Bank combine and the Blackstone-Citigroup-IDFC combine are raising close to $8 billion among them to play this sector with an India focus.For the record, Blackstone’s investment in Synergy has been done from one of its international funds, Blackstone Real Estate Partners International II.
“We could also launch an India-dedicated fund in the future, but the strategy will unfold as the markets unfold,” said Kurt W Roeloffs, managing director and CEO (Asia Pacific) for RAI.
For its 60% stake in Nagarjuna Constructions-promoted NCC Urban Infrastructure, also announced on Monday, and the January 2008 deal in which it bought a stake in Bangalore-based Golden Gate Properties for $70 million, RAI sourced capital from its global pool.
As of December 31, 2007, RAI had total assets under management of $90.5 billion in infrastructure and real estate, with 15% of that being in the Asia-Pacific region.
Although officially launched on Monday, RAI has been scouting for opportunities in India ever since Kishore Gotety, formerly head of ICICI Venture’s real estate division, was hired by the group in September 2007.
“India is a particularly attractive emerging real estate and infrastructure market for our high return-oriented offshore clients. We have plans to investors over $1 billion in India across these sectors over the next 3 years,” said Roeloffs.
Commenting on Axis PE’s new fund, raised in just six months, its managing director and chief executive officer Alok Gupta said in a statement: “It is a positive endorsement to have received such strong support for the fund during the global market meltdown, validating the attractiveness of this investment opportunity.”
sanat_vallikappen@dnaindia.net
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