European property fund manager Cordea Savills has partnered with the Nichani Group to launch a joint venture offer Indian property funds.
The first product launch is the $200 million Cordea Nichani Indian Opportunities Number One, which offers access to land and development opportunities in high growth regions of India targeting net returns of 25% per year. The fund will operate as a closed-ended private limited company incorporated in Mauritius that will concentrate predominantly on opportunities in Southern India and Maharashtra. These regions are characterised by rapid economic and population growth, a young, ambitious and highly educated workforce and political stability. According to Cordea, The Nichani Group has a pipeline of contacts in key cities in this region with exposure to the booming information technology sector.
The Nichani Group is a 60-year-old family business operating out of Chennai, Bangalore and New York. The family has experience in real estate investments and also operates businesses in movie financing, information technology and equity investments.
John Partridge, executive chairman of Cordea Savills, says the firm chose to enter India with this vehicle as its first foray outside European property because of the strong growth numbers in key sectors for the country. “We’ve spent a year and a half looking for partners in India, and we knew because of restrictions on foreign investment we had to do it with a development-led fund,” he says. “The logical concluision is you want to start with a developer, but we didn’t want to get into a situation in which we were in a weak position with that partner, so the way we’ve gone is to partner with an Indian business house, because of their relationships and contacts on the ground in southern India.”
The Indian developers with which the vehicle will partner will cover all major sectors of the market, and will be minority shareholders in Cordea Nichani. The Indian developers will participate on Cordea Nichani Indian Advisers Private’s management advisory board and investment advisory committee. The Indian developers supporting the joint venture are Velankani Infrastructure, land developer the Sastry Group, construction company Caliber Construction, and an undisclosed Mumbai developer.
Partridge says the joint venture will initially focus on residential development, targeting the widening shortfall of homes to meet the demands created by increasing urbanisation, strong economic growth and a rapidly emerging middle class. The Indian government estimates 74 million dwellings will be required in the period between 2007 and 2011. The vehicle will also seek approval for Special Economic Zones (SEZs), which operate as foreign territory for the purposes of tax and regulation. The fund will also look into hotel and leisure opportunities, and down the line it may also target industrial and logistics, Partridge said.