Old Mutual's Ambitious India Real Estate Strategy

Old Mutual, the $4.5 billion financial services giant, is significantly expanding its footprint in the Indian real estate sector. Following successful ventures in life insurance and property services, they are preparing to launch four new funds, each exceeding $1 billion, by 2015. This ambitious undertaking is expected to establish their position among the leading retail developers and asset managers in the country.

Colin Young, Director of Old Mutual Investment Group Property Investments (OMIGPI), outlined their aggressive strategy: "We have [an] aggressive strategy and plan to have four funds of one billion dollar or more for India. We want to be among the leading retail developers in India by 2015 and one of the leading realty asset managers.”

REIT and Core Fund Strategy

Supplementing these funds, Old Mutual plans to create a Real Estate Investment Trust (REIT) designed to raise capital locally. This locally sourced capital will thereafter be directed specifically into yield-generating office assets locally. Additional core funds would in turn acquire properties developed by their offshore development funds, setting up an efficient investment ecosystem.

Partnership with ICS Realty

In a joint venture with Mumbai-based ICS Realty, OMIGPI, known for its South African shopping center developments, has launched its first $500 million property fund. Two-thirds of this initial fund is strategically allocated to retail-centric real estate, primarily to develop and manage shopping centers. The Triangle India Real Estate Fund, initially targeting $500 million by March 31, 2008, has secured $125 million in seed capital from Old Mutual, despite the challenges of a difficult market.

Focus on Tier-II and Tier-III Cities

Old Mutual has expressed a distinctly bullish outlook on the retail sector within India. It's concentrating on burgeoning opportunities in Tier-II and Tier-III cities. According to Kanthawala, "About eighty percent of the middle-class consumers live in these cities, where the penetration of organised retail is only fifteen percent. Here, people have the money to spend, but they are highly under-serviced by organized retail.”

Kanthawala explains their detailed strategy: "In these cities, land is existing at practical prices, and we have the chance to build large compelling centres. We buy huge parcels of land, and rope in big retailers to have their buy-in into the project.” This strategic collaboration with major retailers creates a buffer against potential competition, further fortifying their investments.

Future Plans: Sharia-Compliant Fund and REIT

Looking forward, The organization intends to create a Sharia-compliant fund focused on office and residential properties. Furthermore, once the Indian government releases its official guidelines, Old Mutual will introduce a REIT to access local capital and purchase yield-producing, ready-to-occupy properties, further cementing their position in Indian real estate and broadening their investment horizons.

Pioneer Property Zone

In addition to these endeavors, Old Mutual and ICS Realty have jointly founded Pioneer Property Zone, a property development company tasked with the management of shopping centers. This establishment serves exclusively as an advisor to Old Mutual's funds in India, providing specialized management services to their portfolio of assets. Pioneer Property Zone thus plays a crucial role in enabling The organization to strategically align the expansion of their investment ventures. This solidifies the organization's position as one of the significant players in the Indian retail landscape.