Even if there are reports of some correction happening in the real estate market in India, foreign institutional investors (FIIs) have full faith in India's growth story. They have lined up investments of up to $20 billion in the Indian real estate funds for the next three years.

After the easing FDI investment norms in 2005, FIIs were keen to put their money in the fast growing Indian realty sector.Jones Lang Lasalle Meghraj, a research firm that tracks real estate in India, has estimated that up to 150 real estate funds were in various stages of operation in India last year. In a report, the firm estimates that 50 % of these funds are in active category.

The growing interest in the Indian real estate is attributed to the change in perception of the sector from ‘quicksand' to ‘emerging sector'. Improved performance of the listed realty stocks made it more attractive. Allowing FDI in the sector has led to the entry of multinational developers such as IJM, Ascendas, Hines, CapitaLand and Keppel Land to name a few.Booming IT and ITES sectors as well as the state governments' emphasis on infrastructure development also changed the perception.

An interesting fact revelled in this report is that real estate funds are not just restricted to the metros when it comes to sourcing opportunities. There are established transactions in tier-II and III cities such as Bhavnagar, Jalandhar and Dehradun.With an overall positive sentiment about economy, majority of these funds (64 per cent), expected the Indian realty sector to remain stable.However, funds still prefer investing in Mumbai, Chennai, Bangalore, Delhi NCR and Hyderabad followed by tier II cities such as Pune, Ahmedabad, Chandigarh, and Kochi...

Mauritius-based India Real Estate Infrastructure Fund’s first round of fund raising exercise will come to an end by June by which it plans to mop up $100 million. Launched in January, the fund targets a mop-up of $250 million from across the world for private placements in Indian real estate companies. Balance $150 million will be raised in the following closures. “We plan to invest the money in unlisted Indian real estate companies under the FDI guidelines. We prefer to have weightage of up to 50 per cent in every company so that we can have a ‘say’ in the management. It will help us to drive the policies in the right direction,” said Arun Goel, CEO of DHFL Venture Capital India Pvt. Ltd, which has been mandated to create an investment portfolio on behalf of the fund. The fund will invest in real estate companies pursuing projects in residential, commercial and hospitality domains which also encompass SEZ, IT parks, hotel. DHFL Venture has appointed Mumbai based Yen Management Consultants Pvt. Ltd as financial advisor. The fund will consider factors like the number of development projects in hand, FDI compliance, local presence and growth plans and execution in choosing the company. Explaining the investment rationale, Goel said, “an increasing population and flourishing services sector have resulted in a number of green field projects to build residential and office buildings. Further, rising cost of hotel accommodations across major cities in India has led to high demand for ones with reasonable rates.” Besides EU based countries, the fund is getting good response from Japan, the UK, UAE, said Goel, who expects the fund to give 25 per cent internal rate of return. “We are getting tremendous response from investors across the board but some of them are currently buying time. They are taking stock of the situation in India. However, they will soon get involved in a 2-3 months time,” revealed Sunil Shirole, managing director and CEO, Yen Management Consultants. “We strongly believe in the fundamentals of the Indian economy and its prospects. So we have no doubt about the success of the fund,” added Goel, who did not rule out the possibility of a mutual fund by DHFL in two years.

Dubai-based real estate major Majid Al Futtaim (MAF) is likely to enter India for which it is in the process of identifying a local partner. The country's estimated 16 billion dollar realty sector, which has already attracted UAE-based players like Emmar, Limitless, Nakheel and SmartCity, has been identified by MAF as a 'market to be in'. The company is looking to tie up with a local player to build shopping malls, residential properties and other commercial spaces. "We are studying the Indian market and soon we are going to have a place in the country. India is the company's target and we need to set up operations in the next one or two years," Majid Al Futtaim VP Business Development Younis Al Mulla said. He said a team of senior company officials visited India in the month of March to evaluate various options and held talks with companies here. "We are visiting India again in June to organise roadshows in major cities, including Bangalore, Delhi, Mumbai and also Goa," he added. Asked about the investments planned for India, Al Mulla said, "We do not know it yet as nothing has been finalised. We have not decided on that." MAF also operates hypermarkets, in joint venture with the world's second largest retailer Carrefour, in the Middle East, North Africa, Iran, Pakistan and other markets.