The Economic Times - January, 2006

Foreign funds and real estate developers clearly want to cash in on the realty boom in Pune. After Bangalore, Singapore-based real-estate developer Keppel Land is scouting for tie-ups with local builders in Pune to develop residential projects. US-based Tishman Speyer  Properties, which has a joint venture with ICICI ventures, is also open to developing real estate projects in Pune. Another potential investor is GIC Real Estate of Singapore, according to industry sources.

“There are at least six transactions which are currently available on offer. Term sheets, which is the first step before a shareholder agreement, are set to be signed in four transactions shortly,” said a top builder.

Keppel Land formed a JV with Purvankara Projects last year to launch its first residential project in Bangalore. Keppel, which has a 51% stake in the joint venture, has invested around $5.1m. The company is understood to have initiated talks with some of the local builders in Pune. Tishman Speyer Properties, an international real estate owner/ investor/fund manager, has tied up with ICICI venture Funds management Co to develop real estate projects in India. The company – TSI Venture – is looking at ground development of commercial office, residential and retail properties throughout India.

GIC Real Estate (GIC-RE) is the real estate investment arm of GIC and its mandate is to invest in real estate and real estate –related assets outside Singapore.

“A variety of funds and developers are evincing interest in multiple realty projects in Pune. Local builders who tie –up with foreign funds or developers will see a scaling up of their operations. By virtue of such tie ups, there will also be a delineation between FDI and non –FDI projects. BUT there’s space for all players and more choice for consumers,” say Rohit Gera-Executive Director, Gera Developments.

Estimates indicate that FDI in the realty sector in Pune could touch at least sector $50m this year, if ten transactions go through – assuming a minimum level of investment – of $5m by the foreign partner.

The FDI norms allow foreign companies to set up subsidiaries to develop property with a minimum capital of $10m or joint ventures in which their equity contribution is $5m, but the investments are locked in for three years. They have to build on a minimum plot size of 25 acres for housing development or 50,000 square meters for commercial property. In a city like Pune, nine acres with transfer of development rights will be sufficient to absorb an FDI project.

There are close to 400 builders in Pune. Of this, only a clutch of them – 20-25 builders – would be potential candidates for joint venture tie-ups with foreign funds and developers considering that issues like corporate governance are given a weightage.