Expecting huge value erosion in the realty space, corporates have started to float new funds to acquire assets in the domestic property market.
Corporates such as the Aditya Birla group, GMR Infrastructure, Akruti City, Bangalore-based Nitesh group and Saffron Advisors have either floated or are in the process of floating funds with corpus ranging between Rs 500 crore and Rs 1,000 crore.
“As far as Indian realty is concerned, for the right projects, funds are still available,” said Saffron Advisors MD Ajoy Kapoor. “Conservative European investors, after conducting extensive due diligence and research, are more comfortable with investing in Indian real estate provided they are able to align with the right partners,” he added.
Munich-based retail aggregator Deutsche Capital Management AG (DCM) has underwritten $20 million for Saffron India Real Estate Fund I (SIREF I), an India-focused real estate fund floated by Saffron Advisors. DCM is raising a specific fund for investing into Indian real estate through Saffron Advisors.
SIREF I is currently raising funds in the US, the UK, Europe, the Middle East and the Asia Pacific. It is a $350- $400 million real estate fund with a maximum limit of $500 million.
Bangalore’s Nitesh group is in the process of floating a Rs 1,000-crore property fund to invest in the group’s real estate arm Nitesh Estates’ upcoming project and to buy assets. “We have initiated talks with many European institutions and HNIs to invest in the fund. The initial response is very positive,” said Nitesh group chairman Nitesh Shetty.
Mumbai-based developer Akruti City is also planning to float a Rs 400-crore fund to acquire more properties as valuations drop across India. “We have got Sebi approval to float a real estate fund,” said MD Vimal Shah. “We have initiated talks with domestic banks to raise the funds,” he added. In the next six months to one year, the property value would fall further which would open opportunities for acquiring cheaper real estate assets, he added.
Tough lending norms, an unfavourable primary market and the US financial worries have started to limit money flow to the domestic property market. The number of real estate deals has reduced and fancy valuations projected by developers witnessed a deep correction, said industry officials.
The Aditya Birla group recently said that it has plans to float a fund for real estate with the corpus likely to be over Rs 500 crore. Industry sources also said that GMR Infrastructure is also planning to float a $1billion infrastructure and real estate fund and that preliminary talk are on with institutions and banks.