Reforms by Narendra Modi’s government to allow more foreign investment in India’s property sector appear to be bearing fruit.
Piramal Realty, the Mumbai-based real estate developer, said the US investment bank Goldman Sachs had agreed to invest US$150 million for a minority stake in the company.
It is the second private equity investment that Piramal Realty has attracted over the past six weeks. Last month, US private equity firm Warburg Pincus paid $285m for a minority stake.
These are the latest of several institutional investments in India’s property market since rules over the size of investments were relaxed in October last year.
The minimum level of capital investment for property projects was dropped to $5m from $10m, and the minimum floor area reduced to 20,000 square metres from 50,000 sq m.
In the second quarter, private equity funds invested $946m in India’s property market, up 16 per cent from the first quarter – a record level since 2008, according to Cushman Wakefield, a consultancy.
Piramal Realty, set up four years ago, has developed commercial and residential properties in Mumbai that exceed a total of 10 million sq ft of space.
Its parent, the $5 billion Piramal Group conglomerate, started business in textiles but later expanded into glass packaging, health care and life sciences.
Piramal Realty’s board members include Robert Booth, the former chief executive of Emaar Properties, and Nitin Nohria, the dean of Harvard Business School.
“We have quite a strong Middle Eastern connection,” said Anand Piramal, an executive director of the Piramal Group, adding that the group was working with several former employees of Emaar Properties and Limitless, a real estate developer in Dubai.
“Some are working full time and some as consultants, but they are all helping us to build a great real estate company in Mumbai.”
India’s property sector has undergone a rocky patch recently, with new development starts falling 40 per cent and sales dropping 20 per cent because of the supply glut.
But Mr Piramal said he and his investors were confident of the outlook of India’s property market.
“I think the [property] cycle has bottomed out in India, and now with a new government in place – government that is pro-business, progressive and wants to simplify regulation – they think it’s a good time to buy land parcels when times are still a little bit bad,” he said.
“India is actually the most exciting place to invest,” said Mr Piramal, adding that Warburg Pincus and Goldman were saying that China and Brazil were “going through a tough time”.
He said: “People say that residential prices will fall, but quality developments are so few in Mumbai. For a country of our stature, it’s very disappointing when you see the poor quality of construction. I think that for quality projects there will be good demand.”
Meanwhile, Arthveda Fund Management, a Mumbai-based asset management firm with an office in Dubai, has launched Star Fund II, a $250m real estate fund for GCC investors.
The fund will be invested in mid-market residential properties in 11 cities in India over a five-year period.
Arthveda is planning to make between 35 and 40 investments in cities including Mumbai, Bangalore, Chennai, Kolkata and Jaipur.
Bikram Sen, Arthveda’s chief executive, said the fund was made possible by the reforms made last year, adding that India’s government had taken a greater interest in the country’s property market with a view to creating more affordable housing.
Speaking in Abu Dhabi yesterday, Mr Modi said he wanted to see 50 million low-cost housing units built in India within the next seven years. These are part of $1 trillion worth of investment opportunities that he said were available to UAE investors in the Indian market.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
What is graphene?
Graphene is a single layer of carbon atoms arranged like honeycomb.
It was discovered in 2004, when Russian-born Manchester scientists Andrei Geim and Kostya Novoselov were "playing about" with sticky tape and graphite - the material used as "lead" in pencils.
Placing the tape on the graphite and peeling it, they managed to rip off thin flakes of carbon. In the beginning they got flakes consisting of many layers of graphene. But as they repeated the process many times, the flakes got thinner.
By separating the graphite fragments repeatedly, they managed to create flakes that were just one atom thick. Their experiment had led to graphene being isolated for the very first time.
At the time, many believed it was impossible for such thin crystalline materials to be stable. But examined under a microscope, the material remained stable, and when tested was found to have incredible properties.
It is many times times stronger than steel, yet incredibly lightweight and flexible. It is electrically and thermally conductive but also transparent. The world's first 2D material, it is one million times thinner than the diameter of a single human hair.
But the 'sticky tape' method would not work on an industrial scale. Since then, scientists have been working on manufacturing graphene, to make use of its incredible properties.
In 2010, Geim and Novoselov were awarded the Nobel Prize for Physics. Their discovery meant physicists could study a new class of two-dimensional materials with unique properties.
The bio
Favourite book: Peter Rabbit. I used to read it to my three children and still read it myself. If I am feeling down it brings back good memories.
Best thing about your job: Getting to help people. My mum always told me never to pass up an opportunity to do a good deed.
Best part of life in the UAE: The weather. The constant sunshine is amazing and there is always something to do, you have so many options when it comes to how to spend your day.
Favourite holiday destination: Malaysia. I went there for my honeymoon and ended up volunteering to teach local children for a few hours each day. It is such a special place and I plan to retire there one day.
