Goldman Sachs invests $150m in Indian developer Piramal Realty

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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