# On Thursday last week, IL&FS Investment Managers, the country's largest PE fund manager, said it had completed absorbing the Saffron group, another Mumbai-based fund house which managed a couple of real estate funds. After the merger, IL&FS’ assets under management went up from $2.8 billion to $3.2 billion (Rs 14,400 crore).
# Blackstone, the global PE major, is expected to take over the management of $4 billion (Rs 18,000 crore) worth of Bank of America Merril Lynch's Asian real estate business this week, which includes $500 million (Rs 2,250 crore) of Indian assets.
# Religare Enterprises, promoted by Malvinder Singh and Shivinder Singh, is in the final stages of acquiring Indiareit Fund Advisors, part of the Ajay Piramal group, which manages realty funds worth $1 billion (Rs 4,500 crore), said an executive close to the development.
# Though there was a buzz about Sun Apollo Real Estate Advisors being put on the block by the promoters, the management has denied it.
After a frenzy of fund launches and investments in Indian properties in the past couple of years, real estate private equity funds are moving towards consolidation, as fund raising gets tougher and investors become choosy.
According to data by Venture Intelligence, during the peak of 2007, foreign funds put in around $5.73 billion (Rs 26,100 crore) in Indian real estate as against $4.05 billion (Rs 18,500 crore) put in by their domestic counterparts.
Realty PE funds managed by institutions such as HDFC, Kotak, ICICI and IL&FS could look at acquiring the business of smaller realty funds of $250-300 million in size in the coming days, say three realty fund managers Business Standard spoke to. Indian fund managers are looking at raising Rs 7,000 crore from domestic institutions and high net worth individuals, to invest in real estate.
Competitive pressure
“A lot of funds are competing with each other to raise funds from investors. Private equity has become very competitive. Ultimately, only efficient and capable funds will remain in the business,” says Ambar Maheshwari, director, investments, DTZ, an international property consultant.
Sanjeev Dasgupta, president, real estate, ICICI Venture, agrees. “Raising funds has become very difficult and investors of listed funds are putting pressure on the managements to perform in a better way,” he adds.
Consolidation in global funds, says Maheshwari, is pushed by the economic slowdown and US regulations that banks cannot put their own funds in more than three per cent of a PE fund's corpus. US-based Apollo Global Management had bought Citigroup Property Investors, which had assets of $2.1 bn under management. The management of the Asian realty assets of BoFA Merrill Lynch was set to change hands this week.
Besides competition, fund managers and consultants say each merger is based on different strategies adopted by a fund.
“If you want to grow your platform, handle investments and exits properly, you need to be hands-on. You need a whole lot of skill sets and the merger provided us that opportunity,” says Archana Hingorani, chief executive, IL&FS Investment Managers.
“Saffron's investors come from Europe and the market that looks at listed investments. We can also tap that market,” she says.
Company plans
Another fund manager says buying Indiareit would help Religare to foray into the property fund management business. Early this year, Religare bought majority stake in international PE firm Northgate. For Ajay Piramal, the exit from realty PE would give funds and time to focus on the real estate business he wants to expand, said a property consultant.
Pranay Vakil, chairman of Knight Frank India, says larger funds make sense in the current market scenario. “You will never find a Rs 10,000-crore fund to sell out. Because large funds can invest in small projects but smaller ones cannot put money in larger projects,” he added.
Apart from consolidation, overseas property funds have either pulled out or become dormant in the Indian property market in the aftermath of global economic slowdown. For instance, investors such as Goldman Sachs, Landas Banki and Carval have pulled out from the Indian realty market, while others such as Morgan Stanley, AIG and Wachovia have become dormant.
