Bengaluru: Macquarie Infrastructure and Real Assets (MIRA), an arm of Australia’s Macquarie Group Ltd, and realty firm Tata Housing Development Co. Ltd are close to setting up a joint investment platform to invest aboutRs.2,000 crore in residential projects, said three people familiar with the negotiations.
This will be one of the largest investment partnerships in residential real estate in India between a global investor and a developer. Out of the Rs.2,000 crore equity investment, MIRA and Tata Housing will invest Rs.1,400 crore and Rs.600 crore, respectively.
“The platform has an investment tenure of around three years, with a development timeline of eight years. The investments will be mostly towards greenfield development, where the partners will identify and buy land and develop premium housing projects,” said one of the persons mentioned above, who declined to be named.
Macquarie and Tata Housing declined to comment.
Once concluded, this will be MIRA’s first big real estate transaction in India. Last year, Macquarie, which manages over $100 billion in assets across its funds globally, appointed R.K. Narayan as managing director of its Indian arm, Macquarie Infrastructure and Real Assets (India) Pvt. Ltd, to head real estate investments in India.
Before joining MIRA, Narayan was a consultant with real estate investment firm Aevitas Property Partners and has also served as a chief operating officer at Infinite India Investment Management Pvt. Ltd.
Mint had reported last October that Macquarie is scouting for real estate investments in India and is in talks with Tata Housing for a platform.
Macquarie invested in India, up until 2013, through two infrastructure funds—Macquarie-SBI Infrastructure Fund (MSIF) and SBI-Macquarie Infrastructure Trust (SMIT), joint ventures between State Bank of India, Macquarie and International Finance Corp. (IFC), an arm of the World Bank. Macquarie has also done transactions through its investment vehicle, MAIF Investments India.
“Discussions have been on between Macquarie and Tata Housing for close to a year now. The deal is expected to be closed in a month’s time,” said a second person, who didn’t want to be named.
MIRA is a large infrastructure asset manager globally and also has portfolios in real estate, agriculture, and power across. It’s growing real estate portfolio includes 290 retail, commercial, residential and industrial properties in China, Mexico, and Australia.
Tata Housing has a portfolio of projects across the price spectrum, which is divided between its affordable housing arm Tata Value Homes and premium and luxury homes sold under the Tata Housing brand.
In an interview with Mint in February, managing director and chief executive Brotin Banerjee said that while half of the Rs.3,000 crore that the developer plans to invest in 2016-17 to buy land and develop projects would come from internal accruals, the remaining would come from a platform that it was trying to set up, to fund residential projects in the price range of Rs.1-5 crore.
In May 2015, Tata Housing had also got an investment commitment of $25 million from IFC for its affordable housing subsidiary, Tata Value Homes.
Over the last four years or so, a number of global private equity funds, pension funds, and other institutional investors have formed joint ventures with real estate firms, to develop both residential and commercial office projects.
This is an arrangement that moves away from the traditional blind pool system of raising capital from multiple limited partners. Instead, the investor handpicks a top developer, where both of them commit a certain amount of capital for development and jointly decide on transactions and projects on a deal-by-deal basis.
One of the earliest examples would be a 2012 deal where Godrej Properties and an APG-led investor consortium struck a partnership, to jointly invest Rs.770 crore in residential projects.
Once the corpus was fully invested, in March, this year, the Mumbai-based developer raised $275 million for Godrej Residential Investment Program II (GRIP-II), to invest in residential projects, from a clutch of investors, with Dutch pension fund asset manager APG Asset Management NV as the lead investor.
Another large deal in the residential space was Singapore’s sovereign wealth fund GIC Pte. Ltd’s Rs.1,500 crore joint venture agreement with Brigade Enterprises Ltd to invest in projects in south India in 2014.
“In a debt-dominated sector, most investment platforms are equity-based, where the investor gets the comfort that he is involved from the beginning, and is a part of the decision-making. Because there is a global partner involved, the due diligence process involved is stringent but the capital committed is also patient, putting no such pressure on the developer,” said Shashank Jain, partner-transaction services at PricewaterhouseCoopers India.
