Global funds to invest $14 bn via Indian funds

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Global funds to invest $14 bn via Indian funds

Foreign real estate funds have found a new way to play the Indian real estate game. Up to USD 14 billion has been raised globally for the Indian property market over the past two years, but only 20 - 25% of it has actually been invested, reports CNBC-TV18.

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HDFC BSE | NSE 25/05/12 Are Mutual Funds betting on HDFC?

Foreign real estate funds have found a new way to play the Indian real estate game. Up to USD 14 billion has been raised globally for the Indian property market over the past two years, of which, only 20-25% has actually been invested, reports CNBC-TV18.

Newer global funds are now preferring to hand over their investments to local funds to manage and place their billions, rather than investing directly into projects.

Multi-billion dollar funds like Mitsubushi, Shinco, Rockstone and Al-Futtaim are set to enter India through domestic property funds of ICICI Ventures, Kotak and HDFC .

Arvind Khanna, COO, Beekman Helix India Consulting, said, "We have been approached by a few people and it is very possible that 14-15 such funds are there. At last count 80-100 funds had raised money for the Indian real estate market; so it will not surprise me if a lot of them just raised money with no capability on the ground. But they cannot find the right projects and now, when the market is going down a little, they are having a tough time because of the high returns they have promised their investors."

Domestic realty funds will charge a management fee of between 2-4% and the foreign fund will also pay 20% of the profit received on every investment as a carry or operating fee. While the international fund has the right of co-investment in every property, this gives the domestic fund more money to play with, while allowing the global fund to independently invest more in an identified project if the developer needs more finance.  

With the property market in a correction mode, global funds wanting to invest in India seem to have found the way out. Clearly, the government's intention to curb foreign funding of real estate seems to be having little impact, as global money remains bullish on India.