Kotak Mahindra Bank's realty arm has raised a $295 million private equity fund from offshore clients that it hopes to invest in Indian property sector in the next 18 months, a top executive said.
The Kotak Realty Funds Group, had $800 million across three funds, of which $450 million was available for investment, chief executive S. Sriniwasan told Reuters by telephone on Friday.
“We have investors from Korea, Japan, the Middle East, the UK and the U.S.,” Sriniwasan said, adding while there was no dearth of opportunities, pricing remained an issue.
“We had a reasonably quite nine months prior to this because there was a mismatch in terms of valuation expectations versus what the investors were asking for.
“We believe that gap will get closed out over the next couple of quarters and we do expect to deploy the capital over the next probably 12-18 months,” he added.
Last year, real estate consultancy firm CB Richard Ellis Group Inc rated Mumbai among one of the top five most expensive office markets in the world.
But the real estate industry has been battling tepid sales recently, with the price of residential properties falling by a fifth in the first half of last year as high prices and interest rates brought an end to a five-year boom in the sector.
Shares of Indian realty firms .BSESN plunged more than 80 percent in 2008, far more than a 52 percent fall in the benchmark index .BSESN.
The Mumbai-based executive said falling construction costs due to a plunge in prices of inputs such as steel and cement was a positive for the sector.
“One hopes that it will be a more sensible market to invest in,” Sriniwasan said, adding he expected a 25 percent-plus return from the sector over next three-five years.
Source: Reuters