INRnews - Indian Real Estate News

HDFC, which currently manages a $335-million fund through its subsidiary, HDFC Venture Capital (HVCL) is ready to float an international offshore fund of around $750 million. Come September, and the HDFC fund may be ready to enter the market. The fund is looking to invest in the growing hotel sector, particularly in five-star, budget and business hotels. Investments will also be made in the IT and ITES sector. Investments in real estate developers and firms will be made in the form of equity stakes. Another Indian player, Kotak, is targeting Rs.2000 crore for a realty venture fund.

Funds have been attracted to Indian real estate by the massive opportunity for capital appreciation in this sector. Merrill Lynch forecasts that the Indian property sector will grow from $12 billion in 2005 to $90 billion by 2015.

“India is the most exciting real estate market in Asia,” says Michael Smith, head of Asian real estate investment banking at Goldman Sachs. “It’s one of the last major countries in Asia with an improving market.”

On the international side as INRnews.com has reported before, Morgan Stanley has dropped almost $70 million in a Bangalore-based construction company, Mantri Developers. Merrill Lynch has invested $50 million in Panchsheel Developers, Calpers and the Oregon Public retirement fund have each invested $100 million in the IL&FS India Realty fund.

JP Morgan Asset Management has recently raised $ 360 million through its India Property Fund. The fund has a target net internal rate of return of 20% and aims to develop properties through JVs with developers.

Many funds plan to focus their investments on Tier II cities in order to achieve 20%+ returns. They need to tread carefully here given that the market is quite opaque in some areas and right partners might be hard to find.