A Go South Foreign Realty Funds Trend
February 14th, 2011 | Author: admin
A Go South Foreign Realty Funds Trend
The two recent big ticket deals witnessed in this southern city have put Chennai on the radar of foreign real estate funds and large developers.
AIG Real Estate Fund along with the Bangalorebased real estate firm RMZ Corporation has purchased an 11acre plot at Guindy which formerly belonged to Hindustan Teleprinters Ltd. HTL a subsidiary of telecom equipment maker HFCL for a princely sum of Rs. 298.1crore.
In yet another such deal Shyam Kothari brotherinlaw of Mukesh Ambani has bought IDBIs 2.5acreas Boat Club property in Chennai for Rs. 175crore. Both these deals which had one thing in common i.e. Jones Lang LaSalle international property consultants as advisors have taken the commercial property price in Chennai to a new high.
And the HTLAIG deal has pushed land price in Chennai to a record Rs. 27.1crore per acre from its earlier price of Rs. 1518crore per acre. Over the last 12months the prices of premium properties in Chennai have increased significantly driven in large part by high demand and limited supply.
Guindy traditionally an industrial centre has in recent years emerged as a centre for ITfirms and has been witness to commercial space developments. Software firms and technology parks have come up within the Guindy Industrial Estate as well as adjacent to the property with a major IT project the Olympia Tech Park with about a million sq. ft. of commercial space is also coming up nearby.
HTL a subsidiary of Himachal Futuristic Communications HFCL which took a 74 stake in the firm in 2001 when the government divested its holding is under the purview of BIFR. And HTL has another 50acres on the arterial Mount road which is expected to be auctioned shortly.
Since the easing of rules for inward investment in Indias construction industry in early 2005 the country has been inundated with foreign realty funds such as Warburg Pincer Citi Morgan Stanley J.P. Morgan and MerrillLynch funds which have mobilised over 3000million as investment in the Indian real estate market.
The prices of prime land plots have doubled as developers catch up on half a century of near inactivity to build homes offices and shopping centres fitting for an economy growing by leaps and bounds i.e. around 9 a year. Foreign realty funds believe that in a market where developers are only just beginning to expand from their regional bases picking a partner capable of becoming a national giant is difficult but potentially lucrative. However the task is complicated by the emergence of a raft of new developers as the property boom lures a mixed bag of land owning companies from financial service providers to handrolled cigarette makers.
The soaring property market has complicated valuations; many expect the prices to sustain though some foreign private equity investors feel that Indian property firms have overpriced.
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Source: IndiaRealEstateblog
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