JPMorgan to back Bangalore residential property projects
A JPMorgan proprietary fund will invest INR2 billion ($40 million) in five Bangalore-based residential projects being developed by Nitesh Estates. With the US investment bank’s backing, the Indian real estate firm is expected to raise debt to fund the venture.
The joint venture, in which JPMorgan is expected to take a 50% stake, will develop five million square feet of living space valued at INR15-20 billion, The Times of India reported. It will be Nitesh's fourth private equity infusion, following deals with Och-Ziff Capital Management Group, Apollo Management and Housing Development Finance Corp. (HDFC).
Private equity firms have become a popular port of call for property developers seek alternatives to bank funding. India's central bank has raised interest rates 12 times since March 2010 in a bid to curb inflation, hitting consumer demand for real estate and making it more difficult for developers to access capital.
According to Knight Frank, private equity funding to the sector came to INR12 billion ($252 million) in the three months to August and the consultancy expects it to reach INR35 billion by end March 2012. The combined net debt of India's 11 listed developers rose 15% to INR385 billion in the 12 months through June, said Mumbai-based Edelweiss Securities. If developers can't reduce debt, a spate of distressed asset sales is expected.
Several private equity funds are currently looking to raise capital. HDFC Venture Capital is seeking $400-600 million for what will be its fourth vehicle and will formally begin marketing by the end of November. ICICI Venture is reportedly in the process of raising its Advantage Fund Real Estate Series 2 fund, with a target of INR10 billion. Kotak Investment closed its fourth property fund at INR4.5 billion in July.
According to AVCJ Research, other funds in the market include ASK Property Investment Advisors' ASK Real Estate Special Opportunities Portfolio II fund, which is seeking INR5.2 billion.
The head of Morgan Stanley's India real estate operations also confirmed earlier this month that he was leaving to launch an independent vehicle.
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