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PE interest in Chennai realty market increases

The Financial Express, Mumbai

April 21, 2012

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Driven by end user demand and long-term view taken by the investor community towards the residential real estate market in Chennai, private equity (PE) players show interest in the southern Indian city. In the last three to four months alone, close to R200 crore to R250 crore have been invested in the Chennai realty market.

Recently, Hallmark Infrastructure, a Chennai-based real estate developer, raised R104 crore ($20 million) for two of its residential projects from PE firm, Paracor Capital Advisors, at project level. Knight Frank India was an advisor on the deal.

The project, spread over eight lakh square feet, is targeted at mid-segment houses. "We have entered into a partnership with Paracor for two of our projects, out of which R52 crore ($10 million) is towards the first project for which planning and permission is underway and would be launched in six months' time and the second project in 9 to 12 months' time," Hallmark Infrastructure MD Anand Jain said.

"The project is coming up on the GST road and enjoys a captive audience of over 30,000 employees. The total number of employees is expected to be around a lakh in next few years, thereby providing a ready and established market for the project," Knight Frank's Capital Transaction Group national director Amit Goenka said.

"Chennai has seen marked increase in capital activities due to its consumption-led demand, organic growth of the city, low capital volatility and hence assurance of steady returns," Goenka said.

Among other deals, it is believed ASK, a fund management company, invested about R52 crore ($10 million) in Real Value, Kotak Private Equity invested around R78 crore ($15 million) in Arun Excello and Reliance Capital about R35 crore in another project of Larsen & Toubro and Arun Excello - Estancia.

"Chennai has taken off a little later than compared to cities like Pune, Hyderabad and Bangalore, in terms of investment," Arthveda Fund Management director and chief executive officer Bikram Sen said. "The IT boom never took off for the city but we expect to see development to happen in this region."

The fund had invested R8 crore in a Chennai residential project a year, which will be launching its mid-income housing projects this month.

"While the economic downturn brought the real estate market to a standstill, Chennai's residential market has seen a rebound sooner than anticipated," said a Knight Frank report published on April 11, 2012. "Demand has returned, prices have increased substantially and a number of new projects have been launched in the market. The growth in Chennai's residential market may be attributed to the fact that it is primarily end-user driven. Investor participation is long term in nature, thereby mitigating a speculative market scenario," the report added.

Chennai is slated to witness infusion of around 67,500 residential units in three years, Knight Frank India national head (research) Samantak Das said in the report. Of this, around 68% of under construction units will come up in Chennai south followed by the western region with 27%, he says.

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