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APG, 2 sovereign wealth funds to invest directly with realty developers

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APG Asset Management, one of the world's largest pension asset man agers, and at least two sovereign wealth funds — Abu Dhabi Investment Authority and The Government of Sin gapore Investment Corp— will invest directly in the Indian real estate market moving away from their earlier strategy of routing investments through PE funds. The move to directly invest comes at time when nearly half the real estate funds in India have been unable to offer attractive returns as India's once soaring real estate sector is crippled by increasing debt and plunging sales. In the last five years realty funds have delivered exits worth $4 billion (Rs 21,000 crore), compared with $17 billion of foreign direct investment raised for the sec tor, according to industry estimates.
APG, which manages about 300 billion euro in assets, now plans to work directly with real estate developers, as it looks to establish a stronger footprint in the country' property sector.
"While we do not rule out fund invest ments, our preferred approach is to work with developers and operating partners on a selective basis and create platforms for future growth," Sachin Doshi, senior portfolio manager of APG Asset Management Asia, said in an email.
The Dutch pension fund will seek in vestments between $100 million and $300 million. In July, an APG-led consortium entered into a pact with realty developer Godrej Properties for a Rs 770-crore ($143 million) investment in its residential projects. Private equity participation in the sec tor has dramatically slowed down in the first half of 2012, with the total number of deals with announced value in the space plunging 63% to 12, as against 32 in 2011.
Separately, the total investment over the same period has seen an even bigger drop of 73% to $441 million from $1.63 billion a year ago. Prime residential real estate markets, such as the Mumbai metropolitan region and National Capital Region, saw sales fall by 60% and 57%, respectively, in the first quarter of the cur rent financial year.
On the commercial front, demand for top grade offices across India's seven-largest cities dropped 21% in the first half of 2012. Abu Dhabi Investment Authority, one of the world's largest sovereign wealth funds, has so far invested some $500 million in India, largely through realty or private equity funds. It is also looking for direct investment options.
The cash-rich fund has now set up a team in Abu Dhabi to specifically identify opportunities in the Indian property market. ADIA did not reply to an email seeking its views. The Government of Singapore Investment Corp, which manages over $100 billion of investments across 40 countries, is also scouting for commercially leased-out assets in Bangalore, Chennai and Delhi. It plans to invest anywhere between $75 million and $250 million in India.
"Going forward, we hope to foster close relationships with key Indian partners who share GIC's values as a responsible and long-term investor," said a representative for the fund in an emailed reply.
The sovereign fund has set up its first office in India that will be headed by Kishore Gotety, who declined to share details about investment plans in the country. Private equity fund managers, who typically draw their capital from these global asset managers, are concerned by their decision to now invest directly.
"Fundraising will become more difficult with institutional investors deciding to take more direct exposure to the sector," said Amit Bhagat, managing director and chief executive of ASK Property Investment Advisors, a fund with assets of Rs 1,000 crore under management that was launched in June 2012.
Source: Economic Times

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