HSBC plans $600 mn Indian realty fund

London-headquartered financial services major HSBC is set to be the first foreign financial institution to raise an India-focused real estate fund. The banking major is planning to raise $500-600 million for the realty fund, with fund-raising likely to begin in the next few weeks, sources close to the development said.

“The bank is keen on getting a slice of the real estate market in India. However, the mandate of the realty fund would be such that a small portion of the corpus would also be invested in other sectors,” said an industry source.

An e-mail sent to HSBC Global Investment Banking director and co-head Ravi Menon did not elicit a response.

The proposed fund would be the first India-focused fund for HSBC. It has been making private equity investments in India through HSBC Private Equity (Asia) Ltd.

With real estate becoming a buzzword for investors, several companies have set up realty funds to cash in on the boom in the market. HDFC, Kotak Realty and IL&FS have set up real estate funds where international investors have put money to invest in opportunities in the India realty market. While HDFC raised a $750-million international fund in September last year, IL&FS Investment Managers raised a $502.57-million fund in May 2006. Kotak Realty recently concluded its second fund with a corpus of $400 million.

Some of the other global financial institutions looking to invest in Indian realty include — Goldman Sachs, Morgan Stanley, Lehman Brothers and Merrill Lynch. However, these financial institutions are looking to make investments through their global funds.

In India, HSBC has various subsidiaries, including an asset management arm, an insurance brokerage, a private equity management subsidiary and an investment banking arm. With assets of about $2,150 billion as of June 30, 2007, HSBC is one of the world’s largest banking and financial services organisations.