Tatas, Birlas bet big on real estate

Tatas, Birlas bet big on real estate
The Economic Times, February 26, 2009, Page 5

M V Ramsurya & Rajesh Unnikrishnan MUMBAI

TWO OF India’s large business houses, the Birlas and Tatas, are looking at real estate as a major investment area, albeit in different ways. While the Birlas, through a financial services arm, are offering real estate as an alternative investment option to clients, the Tatas are planning to develop surplus land held by group companies and could also invest in the sector through money raised in recent public offerings.

Interestingly, these moves come at a time when real estate prices are correcting and slow demand for projects has prompted large developers to default on their fi nancial commitments and on project deadlines.

Aditya Birla Management director Ajay Srinivasan who also heads the fi nancial services business, says the con glomerate is merely gearing up for the future. “We are now putting a team in place and want to be ready when the time is right,” he told ET. The financial services arm of the group is setting up a real estate and private equity arm for its wealth management units. To be headed by Sashi Kumar, the real estate business would be managed through Birla Sun Life Asset Management.

The Birlas plan to subsequently launch two real estate funds, offshore and local, for the real estate sector where although the investors would be different, the investment destinations would be in India and could also likely include distressed real estate assets.

Tata Housing Development, a real estate arm of the Tata group, has already said that it plans to leverage its tie-up with banks by developing properties on surplus land owned by other Tata group companies. Tata Housing is now identifying excess landbanks owned by companies such as TCS, Voltas, Rallis India, Tata Motors, Tata Coffee and Tata Tea.

Tata Capital, the financial services arm of the Tatas, is scheduled to close a largely successful non-convertible debenture issue on Tuesday; it has so far raised Rs 2,300 crore against a targeted Rs 1,500 crore. Although Tata Capital has said that it won’t lend to group companies, it has proposed to invest in most asset classes.

Anticipating a large value erosion in the realty space, Indian corporates are planning to float new funds to acquire assets in the domestic property market. Real estate funds such as Saffron Advisors have either floated or are in the process of floating funds with corpus ranging between Rs 500 crore and Rs 1,000 crore. “As far as Indian realty is concerned, for the right projects, funds are still available,” says Saffron Advisors MD Ajoy Kapoor. “Conservative European investors, after conducting extensive due diligence and research, are more comfortable with investing in Indian real estate provided they are able to align with the right partners.”

A few months back, Munich-based retail aggregator Deutsche Capital Management AG underwrote $20 million for Saffron India Real Estate Fund I, an India-focused real estate fund. DCM is raising a specific fund for investing in Indian real estate through Saffron Advisors.

HOUSING IN

Birlas are offering realty as an alternative investment option to its clients
Plan offshore and local real estate funds
Realty arm of the Tata group, Tata Housing Development, plans to leverage its tie-up with banks by developing properties on surplus land owned by group firms
It’s identifying excess land owned by TCS, Voltas, Rallis India, Tata Motors, Tata Coffee and Tata Tea