The Real Estate Syndrome

A lot of fears seem to be plaguing the real estate market. Many believe that a correction in prices is imminent in major Indian cities. Last year, it is estimated that around $10 billion was raised globally to be invested in Indian real estate. But market insiders say a large portion of this money still remains uninvested. And of course, fears abound that foreign investment in this country may slow down thanks to the global credit crunch.

So in the midst of such news, the 9-year, close-ended HDFC real estate fund was a pleasant surprise. The recent closing of its $800 million (Rs 3,280 crore) sponsored international real-estate fund - HIREF International LLC - was only open to foreign investors. An Israeli firm, Gazit Globe Ltd, apparently invested $110 million in this fund.

Obviously, investors still believe that the Indian real estate market currently presents a very compelling investment opportunity. Recently, Hines, the American real estate giant is said to have committed a $300 million fund for investment in Indian projects through its subsidiary, Hines India Real Estate.

Indu Projects Ltd, an infrastructure development company, got three US-based realty private equity investors to invest more than Rs 450 crore in equity. The company is executing projects worth around Rs 16,500 crore and plans to come out with an IPO next year.

Talking of IPOs, Business Park Town Planners Ltd, a 4-year old real estate developer, plans to raise up to Rs 2,000 crore through an IPO. The company is wholly owned by its promoters who plan to offload a 10% stake in this IPO. Last month, the company offloaded a 5% stake to Hong Kong-based Citigroup Property Investors. Earlier this year, India Global Commercial Real Estate (Merrill Lynch's real estate arm), invested Rs 218 crore in the company's infotech park project in Gurgaon.

DLF too is planning something on the similar lines in Hyderabad. The company recently bagged a deal to acquire 25 acres of land for around Rs 452 crore. The DLF Director Rajeev Talwar was quoted in the press as saying it would be "used for IT purposes".

(Source: Value Reserch)