Corporate Giants Eye Indian Realty Amidst Value Erosion
Anticipating a substantial decline in real estate values, corporations are establishing new funds to acquire assets within the Indian property market. These strategic moves come as the market faces headwinds, creating opportunities for those with available capital.
Several major players, including the Aditya Birla Group, GMR Infrastructure, Akruti City, Bangalore-based Nitesh Group, and Saffron Advisors, have either launched or are in the process of launching funds with a corpus ranging between Rs 500 crore and Rs 1,000 crore.
Investment Opportunities and Strategies
Ajoy Kapoor, MD of Saffron Advisors, stated, “As far as Indian realty is concerned, for the right projects, funds are still available.” Kapoor further elaborated on the investment landscape, adding, “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.”
Saffron Advisors has secured $20 million in underwriting from Munich-based retail aggregator Deutsche Capital Management AG (DCM) for its India-focused real estate fund, Saffron India Real Estate Fund I (SIREF I). DCM is also in the process of raising a dedicated fund specifically for Indian real estate investments through Saffron Advisors. SIREF I, targeting $350-$400 million with a $500 million cap, is currently raising capital across the US, UK, Europe, Middle East, and Asia Pacific.
Focusing on Growth and Acquisitions
The Nitesh Group, headquartered in Bangalore, is preparing to launch a Rs 1,000-crore property fund to invest in upcoming projects within its real estate arm, Nitesh Estates, and to acquire additional assets. Nitesh Shetty, chairman of the Nitesh group, commented on the initiative, saying, “We have initiated talks with many European institutions and HNIs to invest in the fund. The initial response is very positive.”
Akruti City, based in Mumbai, is also formulating plans to establish a Rs 400-crore fund for property acquisitions as valuations decline across India. MD Vimal Shah confirmed, “We have got Sebi approval to float a real estate fund,” and added, “We have initiated talks with domestic banks to raise the funds.” Shah anticipates further declines in property values over the next six months to a year, creating favorable conditions for acquiring assets at reduced prices.
Market Challenges and Outlook
Stringent lending norms, a challenging primary market, and concerns stemming from the US financial landscape have begun to restrict capital flow into the domestic property market. This has led to a decrease in real estate transactions and a significant correction in the often-inflated valuations projected by developers, according to industry experts.
The Aditya Birla Group recently announced its intention to create a real estate fund with a corpus expected to exceed Rs 500 crore. Industry sources indicate that GMR Infrastructure is also exploring the possibility of launching a $1 billion infrastructure and real estate fund, with preliminary discussions underway with institutions and banks.