September 11, 2007

Indiareit Plans to Raise up to $750 Million for Property Fund

Indiareit Fund Advisors, the venture capital firm that counts 3i Group Plc among its investors, plans to raise up to $750 million overseas for what may become India's second-largest real estate fund.

The Mumbai-based company may begin tapping investors in the U.S., Europe, Middle East and Japan by year-end, Managing Director Ramesh Jogani said in an interview in Mumbai yesterday. The fund will invest in companies building apartments, malls and offices in India.

India, the fastest-growing major economy after China, may receive as much as $10 billion in overseas funds betting on real estate in the coming 2 1/2 years, Indiareit estimates. Housing Development Finance Corp., Infrastructure Leasing & Finance Ltd., and Kotak Mahindra Bank are among institutions raising money to invest in unlisted developers and projects.

``Demand for space in India seems unending,'' said Raja Seetharaman, associate director at Jones Lang LaSalle Property Consultants in Mumbai. ``Investors are looking for a big opportunity in India as the economy is poised to grow a minimum 7.5 percent over the next few years.''

Real estate funds focused on India have attracted about $3 billion so far, according to Indiareit, on optimism economic growth that averaged 8.6 percent over the past four years will power demand for offices, shopping malls and residences.

India's real estate industry may swell to $90 billion by 2015 from $12 billion in 2005, Moody's Investors Service said in June.

``All the signs are there that the momentum will be maintained,'' Jogani said.

Residential Boom

Indiareit, which raised $200 million from individuals and companies overseas last year and 4.3 billion rupees ($106 million) domestically, plans investments in projects in Mumbai, Bangalore, Hyderabad, Chennai and Pune. ABN Amro Holding NV and ICICI Bank Ltd. helped it raise the money.

London-based 3i Group, Europe's biggest publicly traded private equity firm, invested $40 million in the $200 million fund Indiareit closed in September last year.

Indiareit has earmarked about two-thirds of the amount raised for its real estate funds to residential projects, seeking to profit from rising demand for homes as salaries rise, Jogani said. India faces a shortage of 25 million houses, according to HDFC.

Housing Development Finance, India's second-biggest home mortgage lender, last month raised $800 million from overseas investors for a nine-year real estate fund, exceeding the $630 million drawn by SUN Apollo Real Estate Fund in January.

Kotak Real Estate Fund is raising $350 million from overseas investors in addition to the $500 million it raised locally to invest in houses, offices, hotels and warehouses, Vikas Chimakoorti, a partner at the fund, said last week.

IL&FS Investment Managers Ltd. and U.S-based Milestone Capital Advisors Pvt. plan to raise 10 billion rupees to invest in hotels, hospitals, warehouses, offices and houses.