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July 13, 2008

Real Estate PE firms turning builders

Economic Times has an article on how Real Estate funds are building expertise to execute projects inhouse.
For the funds, the idea is to have better control over their development partners while others are clear that they also want to make the kind of margins that construction offers (25-35%). Apart from the cost advantage, this would also mean a lower dependence on construction companies in a scenario where execution capability bottlenecks are threatening to derail projects.

Trikona Capital, which has over $1-billion investments committed in India, is setting up a development group, which will be headed by the ex-chairman of HUDCO, Dr PS Rana. “There is very little scalability in India. My best development partner has at best developed 5 million sq ft of space,” says Trikona MD Aashish Kalra. Execution is the most important thing, he says.

...“There needs to be a degree of control over your projects. We also believe that there is a development margin to be made here and that will now come to us,” says Sunil Agarwal, chief development & acquisition officer at SARE. SARE has $200 million committed across several projects in India.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.