Kotak Realty Fund, the property investment arm of India’s Kotak Mahindra Bank, plans to raise as much as USD 500 million by the second quarter of this year, in a bet on the long term case for property in Asia’s third-largest economy, a top official said.
The fund intends to raise about USD 150 million to USD 200 million from domestic investors and another USD 300 million from global markets, its director, V Hair Krishna, told Reuters in an interview.
“The long-term macro fundamentals are intact. The markets have nearly doubled since 2005 and we have seen a cyclical turn. So, it’s a good time for investments,” he said.
Private equity funds, including four domestic and 10 international funds, have invested a total of USD 14 billion in Indian property during the last ten years, according to an industry analysis.
Of that, private equity firms have sold Indian property holdings worth nearly USD 2 billion, Krishna said.
Last week, Kotak Realty Fund sold one of its property assets – Peepul Tree Properties – to Tata Realty Fund for Rs.525 crore (USD 117 million). The fund had made an initial investment of Rs.95 crore.
“Many of the investors are concerned over exits, but we could demonstrate this as a market where we can make decent exits too,” said Krishna.
Investments across cities
The fund, which has about USD 750 million worth of assets under management, plans to invest close to USD 100 million over the next couple of months in major Indian cities, he said.
“The investments will mainly be in the residential property assets,” he said, citing Delhi, Mumbai and Bangalore as target markets.
Private equity investment in India nearly doubled last year to USD 7.97 billion from a year earlier, according to a report by research firm Venture Intelligence.
Companies positioned to benefit from rising spending power in the world’s second-most populous country, with an economy growing at about 8.5 percent a year, have been especially sought after by private equity investors.
However, rising interest rates and tighter loan approvals could slow near-term growth in the Indian property sector, Harikrishna said.
Param Desai, real estate analyst at Angel Broking, said he expects a price correction over the next three to four months of 15% to 20% in Mumbai and 10% to 15% in Delhi, with the satellite city of Gurgaon especially vulnerable. He expects prices to hold up in Bangalore and Chennai.
India’s central bank raised key interest rates last week for the eighth time since March 2010.
“Its a cycle. We have seen both ups and downs during the last half-a-decade. And we could also witness the revival in demand,” Krishna said.
Separately, Kotak is raising a USD 300 million private-equity fund to invest in infrastructure projects in the country.
