ICICI Pru launches real estate fund

In a first-of-its kind real estate mutual fund in India, ICICI Prudential Mutual Fund has launched its real estate securities fund.

The fund will invest 51% of the portfolio in high yielding debt securities issued by companies associated with the real estate sector. The scheme will not be directly owning or holding real estate properties. It will invest up to 49% in equity of companies engaged in industries that benefit from the real estate sector or have substantial investments in property.

Debt securities issued by real estate companies have relatively lower liquidity. To manage this risk, the fund has been designed as a three-year, closed-ended fund, which will invest in real estate and oriented sectors like cement, construction, metals, hotels, retail, banks and finance companies.

The new fund offer is open for subscription till 14 December, 2007.

Speaking at the launch, Nimesh Shah, managing director, ICICI Prudential AMC, said: “The Indian real estate sector is growing rapidly, and is expected to register a growth rate of over 30% per annum in the next five years.It is the second largest employer – next only to agriculture and has significant linkages with several other sectors and industries of the economy.”

According to National Housing Bank, India is going to have a shortage of over 20 million housing units and an incremental demands of 8-10 million per annum.In the retail space, India will need an investment of $25 billion to meet the growing demand for malls and multiplexes by 2010.

There are credit risks associated with the fund as the credit rating of real estate companies is generally lower compared with similar-sized companies in other sectors with similar growth rates.This happens because rating assigned to an issue is based on its ability to make timely payments rather than ultimate payments. Since the time cycle of completing a development project involves a lot of time, the long chain of actions implies a potential delay in completing the project and consequent possibility of delayed payment.

Indian realtors are eyeing abroad

Indian real estate developers are trying to find a foothold on foreign soil. In a notice to the stock exchanges a few days ago, DLF declared that it was going to consider international acquisitions and investments in development projects abroad. However, company spokesmen declined to give out details. Recently, Ansals API tied up with Malaysia‘s UEM Group to form a 60:40 joint venture company, Ansal Api-UEM Contracts Pvt Ltd, which could bid for government projects in Malaysia, as also projects worldwide. “This is the company’s second foreign tie-up in recent times. The first one, which was with Dubai‘s Deyaar around three months ago, will work on integrated townships in India. It will focus on the western and southern parts of the country where Ansals API does not have much of a presence, and also concentrate on Dubai,” says Kunal Banerjee, vice-president (marketing), Ansals API.There are others too. Parsvnath Developers’ Chairman Pradeep Jain is looking at greenfield projects in the retail and hospitality sectors in Dubai, Mauritius, Singapore and a few other locations. He will tie up with local developers to share the risks for these projects. The company is already in one such deal with the Al-Hasan Group in Oman.South-based Puravankara Group is doing a project in Sri Lanka � a high-end residential complex, comprising 100 villas, on the road from the airport to Colombo. To be launched in the next two months, it will see an investment of Rs 250 crore (Rs 2 .5 billion). There’s another project too, a commercial office-cum-retail project involving the Sri Lankan government, but that’s yet to firm up.In Dubai, the Hiranandanis are coming up with their showpiece 23 Marina project through a joint venture, Hircon International (forged in 2005), with Dubai-based ETA-Star Property. The construction of this 90-storey high-end residential project, which will cost $250 million, will finish in 2009. However, 90 per cent of the apartments, in the price range of $462,900-$23,14,501, have already been sold, and there has also been a 50 per cent escalation in the price. “The company is now looking at two other projects in the Dubai Lagoons and Business Bay areas,” says Darshan Hiranandani, director, Hircon.The Hiranandanis are also entering into the hospitality sector with 5,000 5-star hotel rooms, which will come up between Abu Dhabi and Dubai. “We will implement this project, which will cost $500-600 million, ourselves, and not through the joint venture,” says Hiranandani.Kolkata’s South City Projects, a consortium of some of the city’s largest realtors, is also working on two projects in Dubai – one, a 150,000 sq ft office building inside the Dubai Investment Park, and the other, a residential project of around 150-200 studio apartments. The total investment for the two projects is around Rs 100 crore (Rs 1 billion). Then there is Dheeraj East Coast LLC, involving Mumbai developer, Dheeraj Group, which is developing a number of office complexes and residences all over the place. And, of course, there is L&T which is constructing luxury residences, villas, condominiums for premier realtors like Nakheel and Trident International Holdings.So what is it that’s making Indian realtors look overseas? According to Parsvnath’s Jain, “The margins in the offshore market are better than what they used to be. Compliance levels are very transparent and financial leverage is easily available. Besides, there is exposure to the latest technology and the benefits for the top-line and bottomline.”Asish Puravankara agrees: “When it comes to our business model, we are very opportunistic, whether it is in India or abroad. It is not just by chance, or because it is nearest to south India, that we are in Sri Lanka. For one, there was a lack of quality developments and two, land was very cheap. There is demand from Sri Lankan expats for luxury apartments and they are willing to invest in their homeland. Besides, the government offers a number of sops on import of material. There is also an office of the Board of Investment of Sri Lanka in Bangalore, which makes things ever easier.”Clearly, Indian realtors are making a name for themselves in the international market. 

Indian realty firm forays into USA

At a time when the real estate players in the country are highly bullish on the sector, here in one developer who has dared to foray into the US where the housing sector woes are continuing.

It is the Pune-based D S Kulkarni Developers which is smelling a business potential in the US and has become the first organised sector real estate player from India to make a foray in the US market.

The company one had popular actress Madhuri Dixit on its board.

Kulkarni Developers has floated a fully-owned subsidiary in Delaware, USA, to develop residential and commercial projects.

Company chairman D S Kulkarni told PTI the idea was to cater to the demands of the Indians settled there. However, a large number of non-Indians have also queued up to buy the houses being constructed by the company.

He said DSK has acquired about 18 acres of land in New Jersey and construction of over one lakh sq ft is on. The company has already invested Rs 80 crore on the US foray and plans to invest another Rs 100 crore over the next one year. Incidentally, the company had posted turnover of over Rs 300 crore last fiscal and about Rs 80 crore in the first quarter this year.

Kulkarni conceded the profit margin in the US market is much less compared to what it is in India. But felt it is steady and reasonable. The cost of land there worked out to about USD 70\80 per sq ft while the cost of construction is about USD 80\90 per sq ft.

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CalPERS commits $500M to Asia real estate fund

The California Public Employees’ Retirement System said Friday it will invest $500 million in the new real estate ARA Asia Dragon Fund.

The fund is sponsored by ARA Asset Management, a member of the Cheung Kong Group. ARA has $4.7 billion under management and publicly-traded real estate investment trusts in Hong Kong, Singapore and Malaysia.

In addition to the $500 million commitment, CalPERS also allocated $500 million for potential co-investment opportunities with the ARA Asia Dragon Fund, which will invest in private real estate. The fund anticipates approximately $1.5 billion in total commitments by CalPERS and other investors not including co-investment allocations. Its target annualized net return on investment is 18 percent.

The ARA Asia Dragon Fund will limit its investments in any one country to no more than 50 percent of its total commitments. No more than 25 percent of the investments in the fund will be in China. Investments will focus on residential development projects in major cities of high urbanization and population growth, in commercial development projects, and in underperforming assets in good locations.

CalPERS now has approximately $3 billion of its real estate investments, commitments and allocations in Asia. The pension system’s global real estate program has approximately $34 billion in investments, commitments and allocations, including approximately $20 billion in total market value of investments.

CalPERS’ Asia real estate investments generated a one-year, after-fee return of 27.8 percent as of Dec. 31, 2006.

Sacramento-based CalPERS is the nation’s largest public pension fund with assets totaling more than $250 billion.

Realty Funds Go ‘Retail’

 Realty fund deals are being downsized. They kicked off with great fanfare in 2005 as platforms for big ticket investors, but are now going retail. The latest domestic scheme, aiming to raise Rs 700 crore, from the Ajay Piramal-promoted IndiaReits, allows for a minimum investment of Rs 25 lakh. Two earlier schemes — a domestic realty fund of Rs 430 crore that closed in September 2006, and an offshore fund of $200 million (Rs 820 crore) — had minimum investment norms of Rs 1 crore and $200,000 (Rs 82 lakh) respectively. The new IndiaReits fund has also created an Rs 30-crore pool to purchase units from investors in case they want to sell earlier. Reality Retail

Saffron to float Rs 300 crore domestic real estate fund

Saffron Asset Advisors, which manages investments of NYSE Euronext-listed real estate investment company Yatra Capital, is planning to raise a domestic realty fund of Rs 300 crore and a bouquet of offshore sector-specific funds in logistics, hospitality, health care, retirement homes and infrastructure.  

The $150 million logistics fund will invest in warehouses, frozen houses, port capacity, airport cargo hubs and package houses across the country. 

The fund manager is also planning a $100 million hospitality fund and $200 million-$ 250 million health care fund which will invest in the respective assets, said Ajoy Veer Kapoor, managing director, Saffron Asset Advisors. More reports