India’s ASK Property Investment Advisors aims to raise a Rs.10-billion ($219 million) fund by December in a bet on the long-term case for property in Asia’s third-largest economy, said a top official.
The real estate-focused private equity firm, which manages assets worth more than Rs.9 billion, is in talks with developers in five of India’s largest cities to deploy the funds, Amit Bhagat, Chief Executive Officer and Managing Director, told Reuters in an interview.
“In the downturn, if you invest, chances are there for superior returns,” said Bhagat.
Weighed down by rising interest rates and a piling-up inventory as customers stay away, residential property prices in India’s largest markets have been skidding.
Slowing economic growth is mounting pressure on property prices in India, which are expected to “correct partly” in locations such as Bangalore and Chennai, Bhagat said.
“We will invest in cities and suburbs, not extended suburbs,” said Bhagat.
The fund will focus on residential projects in Mumbai, Pune, Chennai, Bangalore and the Delhi area, he said.
ASK has already received commitments for more than half of the Rs.10 billion it is plans to raise, he said.
The first fund of Rs.3.4 billion, raised in 2009, has been fully invested, Bhagat said.
India’s central bank raised interest rates by a higher-than-expected 50 basis points on July 26, its 11th since March 2010, stepping up its fight against persistently high inflation despite slowing growth in Asia’s third-largest economy.
“Property prices are a function of interest rate, economic environment and optimism and liquidity,” Bhagat said.
“When optimism becomes cautious optimism, when interest rates become 11.5 percent, liquidity is tight; the investors have a tendency to withdraw from the market.”
