Global funds take JV route for re-entry in India realty

Some of the biggest global investors such as Morgan Stanley, Macquarie and Ivanhoe Cambridge (an arm of Canada's CDPQ) are re-entering Indian real estate after a long gap. These three investors are looking to forge joint ventures worth Rs 4,000 crore.

These investors, along with others such as Goldman Sachs, Citigroup, Merrill Lynch, Credit Suisse, Lehman Brothers and Deutsche Bank, had either exited Indian real estate or became dormant after the global financial crisis of 2008, as they sought to clean their balance sheets and concentrate on home markets.

Now, with reforms taking off in India's real estate sector, including passing of the Real Estate Regulation Bill, sops for real estate investment trusts and affordable housing, some of the global funds are in a mood to return, say real estate experts.

Instead of blind pools, wherein investors give money to fund managers, who in turn have the discretion of putting money in projects of their choice, global investors are preferring joint ventures where they have a major say in investments, allocation and specialised areas such as affordable housing and malls, office projects and so on.

According to market sources, US-based Morgan Stanley is looking to invest in Indian real estate from its global funds and also looking to raise a fund for the Indian market.

Morgan Stanley is in active discussions with Oberoi Realty to form a Rs 1,000-crore JV to invest in the latter's malls in Mumbai. It has a stake in Oberoi Realty. Morgan Stanley did not respond to an email on the subject.

Morgan Stanley shifted all its Indian real estate investments to Proprium Capital set up by former Morgan Stanley employees in 2013. Now Proprium manages its investments in Bengaluru-based Mantri Realty and Pune-based Panchshil among others.

Last year, Morgan Stanley made a comeback in global real estate also, after raising $1.7 billion fund from investors such as CIC, according to a report in the Wall Street Journal. It was the biggest real estate fund raising by the investors since 2007. Morgan Stanley manages funds worth $32 billion in real estate assets out of $400 billion in total assets under management.

Similarly, Australia's Macquarie is looking to make a comeback in Indian real estate. Though Macquarie's real estate investment arm had an office here, it shut it down a couple of years ago. Now, Macquarie is looking to raise a $500 million real estate fund for India, sources said. Its Macquarie Infrastructure and Real Assets (MIRA) is also in talks with Tata Housing to set up a Rs 2,000 crore joint venture to invest in housing projects, sources added. When contacted, a Macquarie spokesperson said the company didn't have any comment to offer. MIRA manages funds worth $105 billion globally.

Ivanhoe Cambridge, the real estate arm of Canada's second-largest pension fund manager CDPQ, is looking to re-enter Indian real estate. Ivanhoe Cambridge opened an office in the country in 2008 to invest in Indian malls and shopping centres, but shut it as it could not find the right opportunities. Now, it is planning to float a $500 million JV with Ajay Piramal's Piramal Fund Management to provide equity capital to property developers. The JV is expected to be signed this month.

Its parent CDPQ already opened its India office earlier this year and appointed World Bank executive Anita Marangoly George as South Asia head. It has committed Rs 1,000 crore for Indian energy sector.

Shobhit Agarwal, managing director - capital markets & international director, JLL India, said the steps such as relaxation in FDI norms in retail, changes in REIT regulations and RERA have eased movement of foreign money into the Indian real estate.

"If the RERA is adopted unanimously, transparency in the sector will improve considerably, an important factor considered by all major foreign investors. These, as a whole, have added a lot to the attractiveness towards investing in Indian Real estate," he said.

Ajay Jain, executive director, Centrum investment banking & head, real estate group, said in the past six months alone, private equity investments have crossed Rs 10,000 crore in the sector. "Investors recognise the cost advantage here and comprehend that slowdown in the sector is short-term and not based on fundamental factors," he said.

BOOM TOWN

MORGAN STANLEY
Global realty AUM
$32 bn

India play:  Holds entity investments in Oberoi Realty, Mantri Realty

New plans: To float a India realty fund; In talks with Oberoi Realty for a mall JV

MACQUARIE
Global realty AUM
$105 bn

India play:  Local realty business was shut

New plans: Plans to float a JV with Tata Housing

IVANHOE CAMBRIDGE
Global realty AUM
Cdn $55 bn

India play: Shifted assets to Proprium in 2013
New plans: In talks with Piramal for a JV

*Cdn$ means Canadian Dollar
Source: Companies