BUSINESS

Emirates target India real estate

By Joe Leahy in Mumbai
December 05, 2007 10:06 IST

The cash-rich states of the United Arab Emirates are sinking billions of dollars into India's real estate sector through joint ventures with local companies as sovereign wealth funds and Middle East investment groups increasingly target India.

Rakeen, a project development company controlled by the government of Ras Al Khaimah, part of the UAE federation, said on Monday it had linked up with India's Trimex Group to build township projects across India.

It is the third such partnership in the sector.

Prasad Koneru, managing director of the joint venture, Rakindo Developers, said the group would "invest about $5bn" over the next five years.

India's biggest listed developer, DLF, and Dubai's Nakheel have announced a joint venture with plans to invest more than $10bn to build two townships on 40,000 acres.

Emaar Properties, the Dubai-based developer and the largest Arab real estate company, has a 40 per cent stake in a joint venture with India's MGF.

The pair, which are planning to hold a $2bn stock market listing, are expected to invest $12bn over five years.

Critics question whether all the joint ventures will be able to realise their plans as they exceed what the established Indian developers have been able to build over the previous decades.

Rakindo is planning to develop 50m sq ft of space and begin construction of its first $1.5bn integrated township in Tamil Nadu, southern India, early next year. Mr Koneru said the company had 4,000 acres of land across the country and was looking to acquire 5,000 acres more.

Analysts said both joint venture partners lacked a track record in such large-scale real estate development.

The joint venture is Rakeen's first move into Indian real estate while Trimex is a mining company.

"I'd be very wary of these announcements," said one private equity executive who specialises in real estate. "It makes me stretch my imagination to think people would give $5bn to people they've never heard of." 

The move comes as Indian real estate is also drawing increasing interest from Wall Street-based private equity firms.

Merrill Lynch this month said it was planning to pay about $377m for a 49 per cent share in a portfolio of residential projects being developed by DLF in one of the biggest deals of its type in India.

The transaction, Merrill Lynch's sixth in Indian real estate, brings its total investments in the sector to between $500 and $600m.

Copyright The Financial Times Limited 2007

Joe Leahy in Mumbai

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