Wednesday, November 4, 2009

Realty funds explore new investment areas

With demand in the sector reviving, PE funds look beyond affordable, low-cost housing projects
After investing in four mid-income and low-cost housing projects in the past one year, Indiareit Fund Advisors Pvt. Ltd, (investor in Paranjape Schemes' Blue Ridge Hinjewadi) promoted by the Ajay Piramal group, wants to refocus its strategy on projects with potential for higher returns.

Indiareit will now look at deploying most of its new Rs500 crore domestic fund announced in October in redevelopment and defunct textile mills projects.

“There are some 25 mills coming up for development and we want to either bid independently or through a special purpose vehicle,” managing director and chief executive Ramesh Jogani said.

“Redevelopment projects, particularly in Mumbai, also have great potential from an investment perspective,” Jogani added.

Indiareit’s revised strategy echoes the sentiments of many private equity (PE) funds with a focus on real estate in India. Funds that had zeroed in on the emerging, affordable housing segment as a demand driver during the economic slowdown believe that with the sector reviving, they should look at other growth areas.

Among such funds are Kotak Realty Fund and Saffron Advisors, (investor in Kolate Patil) which have lined up about $400 million (Rs1,880 crore) and $140 million, respectively, for investments.

Saffron Advisors’ founder and managing director Ajoy Veer Kapoor said his company will seek value in two sectors—warehousing chains and niche, city-centric developments in Mumbai or New Delhi.

“We are not really looking at low-cost real estate projects because it’s still at a very new stage in India and not many developers have the bandwidth to pull it off,” said Kapoor.

The affordable housing story is a recycled version of the integrated township story in India, which never really took off, said V. Hari Krishna, chief investment officer at Kotak Realty Fund.

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