News: Dollar deluge swamps Indian realty

(TT 21/08/2006) Mumbai - Awestruck by the big bang in the Indian real estate, leading money managers are raising huge sums for investment in the sector. Industry estimates put the amount raised by India-specific funds at $3 billion, and this could even touch $4 billion in the coming months.

Apart from the mammoth size of the corpus, the investors, too, are big names in the funds fraternity. The marquee names include HDFC and Kotak from India, while global giants such as Goldman Sachs, Merrill Lynch, JP Morgan, Morgan Stanley and CLSA are all understood to be evaluating possibilities to invest in the real estate. The galaxy of bigwigs also includes Deutsche group and Warburg Pincus.

Some of the funds have already opened the cash tap: Morgan Stanley has invested close to $70 million in Mantri Developers, a construction company based in Bangalore, while Merrill Lynch has plumped for a real estate developer.

Calpers, the pension fund from California, has hitched on to a realty fund of IL&FS.

Other players are in the process of raising money or setting up a fund. Sources said JP Morgan has scooped up close to $300 million and HDFC is ready to float an international offshore fund.

The buzz is JM Financial and Anand Rathi Securities, too, are raising funds for real estate.

The action is not merely in raising cash. Sources said most of these investment banks or financial entities have formed crack teams to identify opportunities in real estate, putting a premium on quality talent.

An employee of a multinational firm said his pay was twice the salary he earned with an Indian fund house that invested in real estate.

“Getting funds is not a problem as there are many investors abroad who know about the India growth story. The only challenge is to find the right opportunity or the target to invest the money here in India,” said an official with a fund house.

Indian houses have also scripted ambitious plans for the real estate story. While the Kotak group is targeting Rs 2,000 crore for a realty venture fund, Housing Development Finance Corporation (HDFC) will launch a $750-million international real estate fund next month.

It currently manages a $335-million fund through its subsidiary, HDFC Venture Capital (HVCL).

According to a report from the CLSA Asia Pacific Markets, the HDFC offering is set for a September launch. It will invest $150 million in five-star hotels and in budget/business hotels.

It will also put the money into the IT/ITeS sector, including IT parks, as well as make equity investment in developers.