MARKETSCAN
India, China offer plum deals
Developers in China and India are starting to offer sweeter deals to foreign investors as they struggle to raise funds through IPOs, according to Citi Property Investors, which is raising its stakes in the markets.
Initial public offerings by fast growing Indian and Chinese property firms have been hugely popular in the last couple of years, but have suffered recently as stock markets slid and the global credit crunch put property securities out of favour.
The turning point came in January, when Chinese developer Evergrande and India’s Emaar MGF Land failed to sell their IPOs. Since then, several developers have postponed planned listings.
Faced with a clampdown on bank loans to the property sector, Chinese and Indian property firms are looking to bring in investors, and have had to accept lower valuations for their land, projects and themselves.
“It has changed the landscape,” David Schaefer, head of Asia-Pacific for Citi Property Investors, told the Reuters Global Real Estate Summit in Singapore.
“The frothiness of IPO markets has created an opportunity for private equity to enter longer term partnerships with developers on terms that are more rational.”
Citigroup runs a $1.3 billion property fund that invests in China and India. Industry sources say the U.S. investment bank is raising another, bigger, fund to follow the same strategies, but Mr. Schaefer declined to comment on the matter.
Citigroup was keen to invest more in the two countries, he said, particularly in residential development and in hotels in India.
Citigroup has teamed up with Indian developer Nitesh Estates to build a Ritz-Carlton hotel in Bangalore, and is building four other hotels to be operated by Starwood Hotels.
“I like hotels, across the board,” Schaefer said. “We’ve got four business hotels on the way, and I expect we’ll do quite a few more.”
Schaefer said infrastructure investment was ratcheting up in India and creating potentially lucrative property opportunities -- for example on land that would border new highways.
“As a real estate investor, there are many interesting opportunities, because if you’re in the path of development, you’ll be rewarded by it,” he said.
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