Real estate to see US$ 12-bn PE funds

With the Indian real estate market slated to grow 35-40 per cent in value terms over the next two years, private equity (PE) players are lining up significant investments in the segment. Led by Blackstone and the PE arm of Deutsche Bank, a host of players -including Red Fort Capital Advisors, Starwood Capital and Walton Street - are expected to invest close to US$ 12 billion combined in homes, offices, townships, hotels and other projects.

Red Fort Capital is preparing to invest Rs 3,500 crore, mainly on budget hotels, while Starwood is committing Rs 800 crore to Chennai-based Shriram Properties. Deutsche Bank will help Suncity Projects raise Rs 1,500 crore, and the Blackstone Group has said it would invest around US$ 18 million (around Rs 73 crore) in Synergy Property Development Services. Kuldeep Chawla, director, Red Fort Capital, said, "We will focus on developing a chain of budget hotels by associating with local developers. About 400 budget hotels with 60,000 hotel rooms are expected to come up in India. We will look at investing in a diversified portfolio of properties."

In 2006, markets regulator SEBI opened up the real estate market to PE investments. The first year was a learning period. "The following year saw a real correction in the market, with large incremental growth rather than dramatic growth, where stock market money went into special purpose vehicle-level investments," says Arun Natarajan, founder & CEO, Venture Intelligence India, which tracks the PE segment.

Balaji Rao, managing director, Starwood Capital said, "We are strategic partners with Chennai-based Shriram Properties to develop a 300-acres township in Kolkata, which requires an investment of Rs 5,000 crore. Apart from Starwood Capital, Shriram Properties is also looking at raising funds from Walton Street Capital. Likewise, following its partnership with Synergy, Blackstone Real Estate is eyeing further opportunities here.

Wadhawan Group plans big investments in F&B, lifestyle
Real estate and retail player, Wadhawan Group is now betting big on food and beverages and lifestyle segments and planning to invest around Rs 3,500 crore in launching new restaurants format and luxury retail expansion plans.

The group has recently entered into a tie-up with Dubai-based Jumeirah Group in order to bring in South East Asian cuisine restaurants for the first time in India, branded as 'Noodle House'.

According to Srinath Sridharan, vice president & head - strategic alliances, Wadhawan Holdings, "Dish Hospitality, an enterprise of Wadhawan Holdings, promoted by the Wadhawan Group, is planning to set up 35 Noodle House restaurants in India at an investment of Rs 1,500 crore in the next four years.

The cuisine at this restaurant will comprise Chinese, Japanese and Thai, among others. The dining for two at this restaurant will cost around Rs 1,000 to Rs 1,500. Plans are on the anvil to launch Noodle House restaurants as a stand alone format as well as within malls.

Further, Sridharan also informed that Dish Hospitality is planning to foray into the international markets such as Europe and UAE in order to set up luxury dine-in restaurant called 'Aurus'. Explains Sridharan, "By setting up luxury restaurants in these markets, we hope to garner a huge return in investments apart from more customers." The company has set up a luxury 'Aurus' dine-in restaurant in Juhu, Mumbai where a dine-in for two costs over Rs 6,000.

Wadhawan Lifestyle is planning to set up four US-branded 'Christian Audigier' lifestyle apparel and accessories outlets each in markets such as Delhi, Bangalore, Hyderabad and Chandigarh. Says Sridharan, "We are also looking at setting up two US branded 'Ed Hardy' lifestyle apparel stores in India. Each store will have an area size of 2,200 sq ft."

Apart from this, Wadhawan Food Retail is planning to set up 1,500 branded retail stores, at an investment of Rs 1,500 crore, in the next two years.

Experts say that in calendar 2007 alone, PE players would have invested US$ five billion in the Indian real estate sector. But there is need for investments of up to US$ 18-20 billion, which are expected in FY09 and FY10, they say. Says Jayesh Kariya, partner, Deloitte Haskins & Sells, "Investments of US$ 1,400 billion are being made by Real Estate Investment Trusts globally. Hence, more global investors will start looking at Indian realty."

This investment zeal comes in the backdrop of a much broader enthusiasm that PE players have shown across sectors in India in recent times. According to a new study by Boston Analytics, around 903 PE deals worth US$ 24.8 billion were signed in India in the period 2004-07, with more than 45 of those exceeding US$ 100 million. This trend is likely to continue strongly through 2010, driven by robust economic growth and attractive market valuations, it adds.