Indian Property News on 'November, 2007'

US Major Trump Plans Entry into the Indian Realty Market

The US based realty major, Trump, is planning to invest in the Indian property market in the next 18 months. Mumbai and Delhi could soon witness Trump Tower on the lines of Trump Organization’s high-rise buildings in Manhattan.

Donald Trump Jr, executive vice-president, development and acquisitions, Trump said that the company’s chief focus will be on high-end projects in Mumbai, Delhi, Hyderabad, Bangalore, and resorts and villas in Goa.

For now Trump is managing several marquee hotels, resorts, casinos and building complexes in New York, including the Trump Casino, Trump International Hotel, Trump Marina Hotel and Casino, Trump Taj Mahal Casino Resort and Trump Tower.

Recently, the company entered the Dubai property market with the Palm Trump International Hotel and Tower through a local joint venture. Trump is also planning joint ventures or licensing agreements with local developers.

Trump believes that that although property prices in India have spiral, they are not as high as global realty prices. Trump believes that the emergence of nuclear families and demand for real estate can drive the growth for high-end developers.

Like the US, India is becoming increasingly urbanised, where more youth are moving into cities which is one of the prime reason that investors and developers like Trump are entering into the booming Indian property market.

UAE based ‘SS Lootah’ to tap into India’s Mushrooming Real Estate Market

SS Lootah Asia, a wholly-owned ancillary of the UAE-based SS Lootah Group, shared particulars of their latest global coalition-the `Sustainable Construction Group’ (SCG) at Cityscape India, the world’s largest B2B construction and real estate exhibition which is programmed to be at Mumbai from 19-21 November 2007.

They are aspiring to launch green buildings in India’s burgeoning real estate sector. The company has wide-ranging investment interests across several sectors in UAE, Asia, Africa and Europe. Their Asian branch will primarily drive investments in essential growth sectors encompassing infrastructure, real estate services, manufacturing and information.

According to their vice chairman, Yahya Lootah, the company would be concentrating on developing green buildings and the enterprise will be spearheaded by SCG, which has an alliance in the private sector sustainable construction domain with over 15,000 employees and 22 experts specialized in LEED (Leadership in Energy and Environmental Design) official recognition.

Sustainable Construction Group (SCG) is composed of ZAS-PSE, TROW, H.H Angus, Lootah-Vanbots, State Group International, TAS Designbuild and NCK Engineering Ltd. The companies bring diverse specializations in global proficiency ranging from architecture and design, engineering consultancy to MEP, Infrastructure and Construction.

The vice-chairman also announced that their investments in India came at a very favorable time as there is a pressing requirement to increase FDI flows into India from the Gulf countries. Currently investments from the Gulf to India are in the range of $2 billion and there are enormous prospects to augment this further, predominantly in the Indian real estate & infrastructure sector which has attracted considerable FDI.

$200 Million Raised by Kotak Global Realty Fund

In its first closure, Kotak India Real Estate International fund has raised $ 200 million. Investors from the US, Europe and Japan have put in money, betting on the booming Indian Realty Market.

Kotak targets to gather an amount of Rs 1,500 crore. According to sources, the same will complete in the next two quarters from countries including Germany and Korea.

Kotak’s investment strategy is to participate in the estimated $45-50 billion expansion across the real estate sector in India in the next four years. The company plans to capitalize on lucrative real estate investment opportunities across all sectors including commercial, residential, retail, lodging, leisure etc.

Kotak Realty Fund arm’s assets under management are now $700 million which includes $500 million from KIREF-1 and Kotak Indian Alternate Opportunities Fund and $200 million from KIREF International Fund.

KIREF-I had raised Rs 450 crore, which has been fully invested in nine realty companies. The list includes Shobha Developers, NDR Warehousing, Lemon Tree Budget Hotels, and Pride Hotels among others.

Kotak India Alternate Opportunities Fund, which primarily focuses on real estate and allied opportunities, raised an aggregate amount of over Rs 1,600 crore ($400 million).

India Witnesses Massive Growth in Retail Sector

Retail sector has witnessed an immense growth in the last few years. The key factors responsible for the retail boom have been the change in consumer profile and demographics, increase in the number of international brands available in the Indian market, economic implications of the government, increasing urbanization, credit availability, improvement in the infrastructure, increasing investments in technology and real estate building a world class shopping environment for the consumers.

If numbers are to be believed, India’s retail industry is estimated at about USD 350 billion and forecast to be double by 2015. After agriculture, retail is the largest source of employment and has deep penetration into rural India. Retailing contributes to 10% of GDP.

As per Associated Chambers of Commerce and Industry of India (ASSOCHAM), the overall retail market is expected to grow by 36%. The organized sector is expected to register growth amounting to Rs 150 billion by 2008. The total size of the market is also expected to increase to Rs 14,790 billion from the current level of Rs 5,880 billion.

Retail is amongst the fastest growing sectors in the country and India ranks 1st, ahead of Russia, in terms of emerging markets potential in retail.

Vornado Plans to Increase Investment in India’s Chatterjee Group

The third- largest real estate investment trust in the U.S., Vornado Realty Trust, is keen to invest in Indian developer Chatterjee Group as economic growth increases construction in Asia’s fourth-biggest economy.

In an interview, Vornado President Michael Fascitelli talked about regional investment at the annual convention of the National Association of Real Estate Investment Trusts in Las Vegas.

According to Fascitelli, Vornado Investment Company owns about 25 percent of Chatterjee after investing some $125 million in the company and its assets over the past two years.

India’s property boom has attracted a lot of International investors. U.S. and European property companies are eager to tap growth in Asia after the collapse of the U.S. subprime mortgage market tightened credit, crimping returns.

Fascitelli further said that Vornado may later sell its Chatterjee investment through an initial public offering.

The Chatterjee alliance, Vornado’s first foray outside the U.S., grew out of Fascitelli’s 20-year acquaintance with Chatterjee founder Purnendu Chatterjee and in house expertise at Vornado.

Trikona Capital plans to raise Rs,1500 crore Indian Realty Fund

Ashish Kalra, co-founder and managing director of New York-based real estate investment company Trikona Capital, revealed plans to raise Rs1,500 crore domestic fund. He also said that the fund would be “by-invitation-only” with “a minimum ticket size of Rs25 crore.”

According to Trikona Capital’s president Mahesh Gandhi, the fund would be deployed in the company’s second series of investments in India. The company also plans to launch a $1 billion (Rs3, 940 crore) infrastructure fund.

Trikona plans to invest around $10 billion over the next 10 years in Indian real estate. Till date Trikona’s has a 16% stake in two projects of Kapstone Construction, a Mumbai-based company; a 5.72% stake in DB Realty, another Mumbai-based firm; an undisclosed stake in a commercial property being developed at Bandra Kurla Complex in Mumbai with Dynamix Balwas; and an undisclosed stake in Luxor Cyber City, promoted by the writing instruments major Luxor and Delhi-based developer, Uppal group.

A report issued by consulting firm Ernst & Young on the real estate sector said that around two dozen funds are lining up funds worth over $3 billion targeting real estate in India.

Blackstone, Morgan Stanley, GE Commercial, Citigroup Property, Berggruen Holding and Bluestone Quantum Management Pvt. Ltd are other international funds considering investments in real estate in India.

India Likely to Get Major Part of 2 StanChart Funds

MUMBAI: Standard Chartered is on the verge of launching a two billion-dollar Asia funds — one for the real estate sector and the other for infrastructure. Significant investment in India is expected from both these mega funds. The group is launching its $1-billion infrastructure fund in collaboration with IL&FS, while the $1-billion real estate fund is being launched with a Middle East partner.

The infrastructure funding needs are estimated at around $500 billion between 2007 and 2012. 70% of this is expected from the public sector. The remaining will come through private funding, which includes public-private partnerships. Given the fact that no other country has such a large absorption capacity, most of the global institutions are thinking of setting up infrastructure funds here.

ICICI Bank is also in the process of setting up a $2-billion infrastructure fund. Other in the list includes Citi, Blackstone and 3i as well as private sector banks like Axis Bank.

The infrastructure fund will be jointly managed by StanChart and IL&FS. “The fund will look at investments across Asia (ex-Japan). It will also provide an opportunity for Indian firms to tap opportunity in other Asian countries. According to bankers “The cost of implementing infrastructure using Indian know-how is 70% of any OECD country”.

The fund will have a life of 12 years, with a commitment of 4 years. Sources revealed that there is a good investor interest for these type of funds. This would be the first time that an Indian infrastructure financing company is involved in setting up a regional fund.

StanChart is likely to tie up with Isthimar, the Dubai-based investment firm for the real estate fund. As per sources, sizeable investments are likely to flow into India. Both the funds are likely to be launched in the next couple of months.

StanChart has been scaling up its infrastructure and real estate business in India. The infrastructure fund will make equity investments. In the real estate fund, other than the partners bringing in a part of the funds, they will also look at third party investors. The fund’s size could be increased depending on the interest of third party investors.

GrandVision Seeks a Deal with Reliance

Vision Express, part of Europe’s largest optical retail group GrandVision is in discussion with Reliance Retail for an exclusive distribution agreement. Vision Express is also planning to set up distribution centres in India, to supply to Reliance stores.

Whereas, Reliance Retail’s president & CEO in charge of operations and strategy, Raghu Pillai, said that, he is not aware of this and it’s not true.

Reliance currently has over 300 stores and has further expansion plans on a large scale. A tie up will definitely give Vision Express a wide footprint in India.

The UK-based “Vision express” is known to have pioneered the concept of providing custom-made spectacles within one hour to its customers. Its stores offer eye-exams, are equipped with laboratories, and sell contact lens, sunglasses and accessories, apart from prescription eyewear.

According to experts “The Indian eyecare market is highly under-penetrated and the requirement for quality services and product is huge. At present the industry is dominated by unorganized segments.”

Globally, Vision Express has around 220 stores in UK and Ireland and revenue of $392 million. Its parent company, GrandVision, is headquartered in Paris and operates over 550 optical retail outlets in 11 countries, primarily mainly in France, Ireland, Italy, and the UK.

Real Estate Fund Emerges As A Promising Prospect

Investing in property has come up as an excellent prospect to gain high returns within short period of time. This is mainly because of capital appreciation. Contrary to regular returns, high returns come at a cost as making investments in real estate which has nowadays become very cumbersome. What you have to be the most careful about is narrowing down on the right property.

Properties are becoming expensive day be day. It requires the investor to commit large funds at a single go. Funds are locked up for a long time and the money invested is illiquid. Therefore, many investors have to stay away from such a form of investment.

This was once a major drawback which ahs been worked on and improved to a certain extent when many companies promoted real estate funds. These are venture funds with a focus on real estate, managed by the market regulator SEBI. The authority managed it under the category of venture capital funds.

The offer document of these funds is privately circulated. The investment is high with the minimum amount to stand at Rs 25 lacs. The funds are gaining popularity among high net worth individuals (HNI). Liquidity remained the main problem as they had a lock in period of maximum six years.

The scenario changed with the recent policies drafted by SEBI. It can change the way investors should approach properties for investments. SEBI opened the gates for the launch of real estate mutual funds (REMF) which are based on the concept of pooled diversification. REMF will have an investment aim to put money directly or indirectly in Indian real estate and will be governed by SEBI (Mutual Funds) Regulations.

High Demand Pushes Realty Growth in India

Indian property market is making rapid strides. However, the credit also goes to the government which has been taking several initiatives to draft new policies in order to push investments in the sector. It includes liberalization of foreign direct investment (FDI) in real estate and introduction of the SEZ Act.

The government allocated a whopping Rs 50,000 crore under the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) to improve urban infrastructure in 63 cities.

Taking a look at commercial property in India, it is looked upon as the key driver with the IT/ITes sector accounting for 75% of the total property demand.

A high proportion of supply of IT/ITes space will come from the development of Special Economic Zones (SEZs). The available space in these tech-enclaves is likely to reduce the appeal of STPIs, as both builders and occupiers will enjoy substantial tax benefits within SEZs.

No far behind is the Indian residential property market, which accounts for 75-80% of the total turnover of the entire real estate in India. As such, there is a shortage of 24.7 million houses in India.

Currently, private property developers are largely focusing on constructing housing units for middle class and poor. Rising disposable income and the trend towards nuclear families are the significant factors pushing the demand for residential properties in the country. <.p>

So far, the situation in both the commercial and residential market has been based on the built and sold. With increasing supply, developers became meticulous about factors such as location and start targeting the segments for which they develop. Amidst a supply-rich environment, accurate demand estimates will become highly important.