Latest Real Estate News on 'Bangalore'

HDFC Property Fund raises $250 mn via offshore fund

Bangalore/Mumbai: HDFC Property Fund, the private equity arm of Housing Development Finance Corp. Ltd, has raised $250 million (around `1,500 crore today) through an offshore fund. It hopes to raise another $150 million by the end of the year, said a person directly familiar with the development who did not want to be named.

On Friday, HDFC Property Fund informed the BSE that it had raised the capital through its second international fund, saying “the recently closed fund will focus on investing primarily in residential property developments in major cities across India”.

The cumulative assets under management now exceed $1 billion, the statement added.

The new fund, which started raising capital in 2012, had targeted a corpus of $500 million. But it has raised only $250 million so far, and decided to do a first close and start the process of investing before attempting to raise another $150 million, said the person cited earlier.

Typically, funds that aim to raise a large corpus raise a certain amount of capital and announce a first close, after which they start investing in deals.

HDFC Property Fund had last raised $800 million through Hiref International Llc, an offshore fund, in 2007.

Its new offshore fund will start investing the capital it has raised and will invest a maximum of `240 crore in each transaction. It will invest in Bangalore, Kolkata, Delhi-National Capital Region (NCR), Pune and Mumbai.

The fund will invest in residential projects and is expecting an internal rate of returns (IRR) of 23-24%.

“We will do structured investment with a portion of equity in these investments,” the person said.

Of the $250 million, the fund has already committed `800 crore across a few deals in Mumbai, Pune and Bangalore.

One of these is the Vrindavan Tech Village project in Bangalore, which is being developed by realty firm Embassy Property Developments Pvt. Ltd and where Blackstone Group Lp is an investor.

HDFC Property Fund will invest around `240 crore in the 30-acre residential component of the project, said a second person familiar with the transaction.

HDFC has raised the offshore fund in difficult capital-raising conditions when global investors are wary of putting their money in the Indian real estate market.

Funds raising offshore capital are, in fact, finding it far more challenging compared with domestic capital, which is still easy to come by.

Financial services firm ASK Group, which plans to raise a $200 million real estate offshore fund, has raised $50 million from global investors on its own and has hired Cushman and Wakefield as a placement agent to help raise the remaining $150 million.

“This (HDFC) fund raise is a sign that foreign investors are back looking at India and they are ready to give capital to Indian funds. The expectations from the government is very high and investors are starting to re-invest in India,” said Ambar Maheshwari, managing director-corporate finance, at property advisory Jones Lang LaSalle India.

Ansal to raise Rs400 crore from Peninsula Brookfield

Bangalore: Ansal Properties and Infrastructure Ltd is set to raise Rs.400 crore from Peninsula Brookfield Investment Managers. Peninsula Brookfield is a joint venture between Peninsula Land Ltd and Brookfield Asset Management with Rs.1,000 crore worth of assets under management. The money will be deployed from its maiden fund, Peninsula Brookfield India Real Estate Fund. The transaction is in the last stage of closure and the money will be raised through the non-convertible debenture (NCD) route in the form of structured debt, said two people directly familiar with the transaction. The money is being raised for a massive 2,500 acre development that Ansal had undertaken back in 2009, in a project called Metropolis in Greater Noida. The project, which is under construction, will take another five-six years to complete. “The capital will be used for a mix of things—some of it for project development and some for refinancing earlier loans on the project which will be maturing soon,” said a company executive, who didn’t want to be named. From peak debt levels of Rs.1,800 crore four years back, Ansal has tried to constantly pare debt. Currently, the real estate firm has a gross debt of around Rs.1,050 crore. Property consultant Knight Frank India is the adviser to the transaction. Peninsula Brookfield declined to comment. NCDs have been a popular debt instrument among real estate developers in the past three years. NCDs typically cannot be converted to stock and offer yields of 14-20%. Peninsula Brookfield’s investment strategy is to look at financing and refinancing opportunities, quick turnaround opportunities and buy-in at below intrinsic value with a margin of safety. While looking at deals in key property markets such as Delhi, the National Capital Region, Bangalore and Pune, it partners good quality developers who are in need of capital to restructure their balance sheets or grow. “Investors are not shying away from large projects even though they are long gestation projects. Once the land is acquired and sales start, funding usually comes in where a developer would have sold stock substantially,” said Ambar Maheshwari, managing director, capital markets, property advisory Jones Lang LaSalle India.

Siemens sells plot to Prestige for Rs 345 crore

BANGALORE: Engineering and electronics conglomerate Siemens has sold an 8-acre prime plot in south Bangalore to builder Prestige Estates for Rs 345 crore. The Bangalore-based builder entered into an agreement with Siemens on Thursday and has already paid an advance and registered the property on Koramangala Raod, a residential hub for the city’s IT professionals. An official announcement is expected later this week, two persons with direct knowledge of the deal told ET.

The transaction was handled by Juggy Marwah, managing director south India for JLL India, a real estate consultancy firm. Marwah declined to comment. The entire sale procedure for the property, which has been in the market since 2011, lasted six months, said one person in the know. Siemens had earlier entered into an agreement with another Bangalore builder, RMZ Corp, to sell the same land parcel in 2011, but the deal fell through. RMZ had paid an initial instalment of Rs 32 crore to Siemens for this land parcel. According to sources, Siemens has returned 50% of the money to RMZ against the property.

The 8-acre land parcel came under Siemens’ control after a merger of Siemens VDO Automotive’s business with the equipment manufacturer in 2005. Earlier, the land used to house a factory of Siemens VDO Automotive. Koramangala Road is one of the key localities in south Bangalore, largely known for its residential commercial development. Real estate projects here fetch around Rs 9,000 to Rs 15,000 per sq ft depending on the facilities offered by builders. Siemens have been planning to sell land parcel across major cities like Mumbai, Bangalore and Pune as part of its value optimization strategy. Prestige Estates Projects has 59.47 million sq. ft of projects under development across residential, commercial, hospitality and retail. The South-based builder plans to launch 31.96 million sq ft this fiscal with 76% of it to be residential projects followed by commercial and retail. The builder has 377-acre of land bank across South.

Commercial realty gets a boost as companies gear up to cash in on “Acche Din”

Companies across industries such as IT, consultancy and e-commerce have begun leasing and buying office space in expectations of an economic boom under a stable central government — a development that will rejuvenate the job market.

Top property consultancies in the country such as Cushman & Wakefield, CBRE, JLL, Knight Frank and DTZ say they have mandates from various corporates to lease about 40 million sq ft of space in the top seven cities this year. With firms planning to use more than half this space for expansion, conservative estimates show that they will create around 350,000 jobs in the process.

“There is a sense of urgency among clients today,” said Viral Desai, director – office at Knight Frank. “While not much has changed in their business so far, with a new government in place, they are preparing for growth. No one wants to miss the bus,” he added. Consulting firm KPMG recently leased over 700,000 sq ft of space in Bangalore and there is buzz in the market that its peers EY, Deloitte and PwC are also looking to ramp up. Many of the big Japanese and Korean firms are looking for space, though demand from the IT industry — doing well on the back of a US recovery — is still the biggest.

Accenture, for example, is looking for about one million sq ft of space in Bangalore, according to property consultants. Another big segment vying for space is e-commerce which has seen multiple rounds of consolidation and entry of big global players such as Amazon and eBay over the last one year, with players adding offices and warehouses on hopes of a boom in consumer spending.

Bangalore-based RMZ said it has already leased 3.25 million sq ft in a business park in the city to corporates such as SAP, Morgan Stanley, ANZ and Honeywell in the last few months. While large scale leasing might not be back just yet, the first signs are here.

“Corporates, both Indian and foreign, foresee 2016 as a big year and they are starting to plan for that growth today,” said Bhumesh Gaur, co-chair at India chapter of CoreNet Global, an association of corporate real estate professionals whose members include over 100 India and foreign corporates. A landslide victory for BJP-led National Democratic Alliance in the general elections triggered the new-found excitement in the corporate sector. “In our conversations with companies till a few months ago they were more interested in maintaining status quo as they were uncertain.

There were no large futuristic calls on expansions. That’s changing now,” said Anckur Srivasttava, chairman of GenReal Property Advisers. Srinivasan Gopalan, chief operating officer at Mumbai-based developer Wadhwa Group, said the company’s leasing pipeline has doubled since the election results to nearly 400,000 sq ft now. “Enquiries have gone up substantially,” he said.

The development will boost the job market, which has slowed down due to subdued economic growth that hit production and consumption. According to an ET Intelligence Group analysis of close to 250 companies belonging to the S&P BSE 500 index, employment growth slowed to 3.5% in FY13 from 5.7% in the year before and 6.4% in FY11. There could be an improvement this fiscal with corporates planning to use about 25 million sq ft of office space they plan to take on lease in top cities such as Gurgaon, Bangalore, Pune, Hyderabad and Chennai for expanding their businesses. “There is a lot of positivity in the environment now as challenges of project approvals and capital inadequacies are being done away with.

There is significant expectation of de-congestion of growth from now on. Overall growth expectation for the job market in the next one year is very bullish,” said Rituparna Chakraborty, senior vice president at HR consultancy firm Team-Lease Services. “The challenge for India now is not job creation but finding the right talent and skillset,” he added. Meanwhile, rising demand for office space may lead to supply shortage and high rentals. Over the last few years, as demand for office space declined, as a kneejerk reaction most builders started to defer new office projects and shelved many projects.

According to JLL, across the top seven cities, expected total supply of grade A office space is only about 31 million sq ft in 2014 compared to 44 million sq ft in 2011. “In most cities, enhanced interest from companies has not kept pace with commercial property developers with lack of new launches. The rentals are expected to move up by 5% to 10% this year,” said Ashutosh Limaye, head of research at JLL India. Srivasttava of GenReal Property said he expected office rentals to keep rising constantly over the next five years.

Source: Economic Times, By Sobia Khan, Kailash Babar & Ravi Teja Sharma

Private equity firms exit real estate companies with good returns

BANGALORE/MUMBAI: At atime when the Indian property market is showing sluggishness, some private equity firms have exited their investments in real estate companies and locked in good returns too. Of the total institutional PE capital deployed until March 2014, nearly a fifth, amounting to $6.9 billion, has been exited by PE funds, according to a recent report by Brookfield Financial.

This is in contrast to the perception that private equity funds are stuck with their investments and are finding it difficult to make a profitable exit.

Some experts say this trend could get stronger. “Exits in India will accelerate into the second half of this year and next. I would expect that the renewed interest in India, along with a more pressing intent to exit among existing stakeholders, will lead to more volume of deals in the secondary market while residential projects which have matured will generate cash flows to provide investors with an exit,” said Sourav Goswami, principal-head of capital markets at Red Fort Capital, which has invested $1 billion with several successful exits.

According to Jones Lang LaSalle, a property consultancy, returns from Indian real estate for private equity investments with vintage of 2006 stand at 1.1 times compared with the global average of 0.86 times. Performance in the last six years is even better at 1.34x.

“India fares better compared with other property markets, irrespective of whether the exit has come through a third party or promoter buyback. The factor that matters the most is if the fund has derived good returns from its investment or not,” said Shobhit Agarwal, managing director at Capital Markets at JLL India. Depreciation in the rupee, delays in construction, weak economic conditions and sluggish property sales have restricted realty private equity offshore funds’ fresh capital raising efforts and also trapped their earlier investments. But with improvement in the scenario, the renewed confidence seems to be helping fund houses set more optimistic targets.

“With increased confidence among institutional investors and high net-worth individuals due to clarity in macro environment in the backdrop of a stable government, more profitable exits can be expected now,” said Rubi Arya, director and vice-chairman, Milestone Capital Advisors.

“We plan to return .`1,200 crore in this financial year to our investors, which includes about .`700 crore of capital.” Milestone Capital exited seven investments in 2013 with average returns of 22%. The fund has also made some partial exits since January this year.

According to Brookfield Financial, the residential sector accounted for over 58% of the exits and the office sector 24%. Besides, about 85% of the exits were through promoter buy-backs. Since 2005, $37 billion has been raised and deployed in the Indian real estate sector by institutional PE funds.

“PE interest have gone up and we will see the momentum picking up further in the next 2-3 quarters as market improves. Further definitive policy regime and lowering of interest rates will attract more foreign capital in the country,” said Rajeev Bairathi, executive director, capital transaction group and north India, Knight Frank India.

In the quarter to March, PE funds more than doubled their investment in India’s real estate sector on hopes of an improvement in the country’s economy. In the first quarter of 2014, PE funds invested.`2,800 crore in the country’s real estate sector, an increase of 2.3 times compared with the year-ago period, according property consultant Cushman & Wakefield.

By Sobia Khan & Kailash Babar, ET Bureau

Real estate sector now banks on BJP to give push for affordable housing.

Reacting to election outcome, Anuj Puri, Chairman and Country Head, JLL India, said: “Housing shortage is legendary, and the Indian Government has always kept low-cost housing in the focus. However, most developers have shied away from focusing on this space because affordable housing is a relatively low-margin business; and in high inflationary scenario, profitability remains a key concern. Equity participation by PE funds has also been limited in the budget housing space.”

“The new Government may look at helping on quicker land acquisition, faster approvals, easy and low-cost funding availability and better infrastructure to make it a more interesting proposition for developers and investors,” he added.

He further added that in Gujarat (the home state of Narendra Modi), the Government has been extending a helping hand to developers who construct low-cost homes, although availability of cheap capital, lengthy approval process and affordable land availability continue to remain challenges.

Global PE funds more than doubled investments in Indian realty: C&W

BANGALORE: Global private equity funds more than doubled their investment in India’s real estate sector in the quarter to March as they foresee an improvement in economy leading to stable long-term yields, according to a report by brokerage Cushman & Wakefield.

PE funds invested Rs 2,800 crore in the country’s commercial and residential real estate during the period, a 145% jump over the year-ago quarter, the report said. “This is the highest quarterly private equity investment since Q2 of 2009 by private equity funds in the realty sector, driven by huge investment in commercial real estate and steady fund raising by developers in the residential asset class,” it said.

Sanjay Dutt, executive managing director for South Asia at Cushman &Wakefield, said investor interest is expected to grow in office as well as residential property this year. “Improving economic conditions and stable long-term yields are expected to result in increased investor interest for commercial office assets in 2014,” Dutt said. “Considering the attractive returns in the residential sector, along with the high funding needs of developers, steady investments in the residential sector are anticipated.”

The report said average deal size increased 35% to Rs 156 crore per transaction during the quarter. The construction development sector saw foreign direct investment (FDI) inflows worth Rs 1,430 crore in the quarter, which is the highest level of investment since the third quarter of 2009.

The report said global fund houses such as Xander Group, Peninsula Brookfield, Stan-Chart RE and Blackstone committed big bucks to the Indian real estate sector.

While Blackstone and Standard Chartered together invested in Rs 1,150 crore in Vrindavan Tech Village, a special economic zone being developed by Embassy Group on the outskirts of Bangalore, Mantri Developers raised Rs 250 crore from Peninsula Brookfield for a residential project in Bangalore and Oberoi Realty bought a land parcel in Mumbai from Tata Steel for Rs 1,155 crore. “Most investors, especially those who are growth investors, don’t see this sector as a very attractive investment destination currently.

This may be a great opportunity for those who can price the fundamentals, work the real estate, have a longer-term view, a stomach for volatility and patient capital,” said Siddharth Yog, founder and managing partner at Xander Group Inc. Jasmeet Chhabra, principal at Red Fort Capital, said the last three years did not see much FDI in the real estate sector, but things are improving now. “It has become more lucrative in terms of valuation, demand-supply mismatch continues to hold. Once we see a stable government, the deal momentum will pick up,” he said.

While the commercial office sector saw investments worth Rs 1,440 crore during the quarter, the residential sector got Rs 1,070 crore of inflows, contributing about 51% and 38%, respectively, to overall investments mentioned in the report.

“The capital would help fund much needed real estate investment to create and hold facilities to house the economic activities,” said Jonathan Yap, assistant group CEO for overseas funds and India at Ascendas.

Source: ET