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U.S. Private Equity Goes Town-Building In India

Shriram Properties on Tuesday said it would partner with U.S. real estate private-equity firms Walton Street Capital and Starwood Capital Group to develop a $1.25 billion township in eastern India.

The project in the city of Kolkata in West Bengal will cover about 20 million square feet of land and include residential, retail, office and civic infrastructure, the companies said in a release. Hindustan Motors previously owned the land. International architecture firm HOK has been signed on for the project.

“Starwood Capital is committed to playing a strategic role in this alliance and creating a world-class integrated township. The group is focused on expanding its footprint in India both in real estate and the hospitality sectors, across asset classes and geographical regions,” said Balaji Rao, managing director of Starwood Capital India. Last year, it reportedly committed $500 million to investments here.

Shriram Properties is the real estate arm of the $6 billion Channai-based Shriram Group that has interests ranging from insurance to technology. It has built over 4.5 million square feet of residential and commercial space in the cities of Bangalore, Chennai and Hyderabad. The company is developing 70 million more square feet of space across the country, including retail, hotels and civic infrastructure.

Shriram Properties and both the PE companies will have a 33% stake each in the project, said Sourav Goswami, managing director of Walton Street Capital India. The project is expected to take about seven years to complete.

“We are looking at other Indian metros as well. But there is tremendous potential in Kolkata. The government has been proactive in creating a growth environment for tech companies. It’s emerging as a strong services destination. Infrastructure is being developed rapidly,” Goswami said. Since Kolkata has seen more moderate growth, prices haven’t risen as fast as cities like Mumbai and Delhi.

With returns of around 30% and more, the Indian real estate market has become an attractive destination for domestic and foreign players, sending property prices skyrocketing. For the first half of the year, real estate investments accounted for about a third of all private-equity investments in India, at $2.2 billion. Avenue Capital, DE Shaw and Morgan Stanley were among the investors.

But among the key problems dogging investments in the sector are the lack of proper regulatory infrastructure and a shortage of skilled manpower on the advisory side, said Goswami. This is Walton Street Capital’s first investment in India. It is likely to announce a deal in the next few weeks.

Source: Forbes

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