Ansal Housing sets up shop in New York

Empowered by India's surging real estate market – and its own swelling profit margins – Ansal Housing & Construction Ltd., one of the subcontinent’s largest property developers, has opened a new branch sales office in New York City. The office, which Ansal Housing established through its U.S. partner, Goodwill Capital Inc., targets expat Indians who are interested in investing in Ansal's commercial and residential projects in India.

Officials from both companies attended the opening of the new office at a press conference in New York on Oct. 12. New Delhi-based Ansal Housing touts the location as a means to connect brokers and agents in the United States that it has approved, and as a tool to market its services to nonresident Indians living in areas of North America with predominantly South Asian populations.

Property prices in India are rising fast, and not just in the biggest cities,” Ansal Housing vice president Karun Ansal said at the event. "As the tech boom spreads across the country, as more Indians buy homes, and as the economy grows at faster than 8 percent a year, real estate is attracting more investors – many of them from abroad."

Indeed, domestic and foreign demand for property in India has surged in concert with the country's rapid economic growth. Following a decade of stagnating property prices, the Indian real estate sector has experienced an unprecedented boom since 2004, with prices rising by over 50 percent annually in some cities. Price appreciation has occurred across the board, in major cities such as Bangalore, Delhi and Mumbai, and smaller cities like Chennai, Hyderabad and Pune, which have established themselves as alternative outsourcing centers and business locations; and satellite cities and towns that have experienced price appreciation as economic activities have diversified and infrastructure has improved.

"The real estate sector in India is attracting huge investments," Ansal said. "Private equity players are considering big investments, banks are giving loans to builders and financial institutions are floating real estate funds."

The Indian government encourages nonresident Indians and foreigners alike to invest directly in the country’s real estate market, yet it wasn’t always this way. For years, only nonresident Indians and persons of Indian origin were permitted to invest in the country’s housing and the real estate sectors. Federal law limited foreigners to investing in integrated townships and settlements either through a wholly owned subsidiary or through a joint-venture company with an Indian partner.

But in early 2005, Indian lawmakers amended existing policies to allow 100 percent foreign-direct investment in townships, housing, established infrastructure and various other types of construction projects, including hotels, resorts, hospitals, educational institutions and commercial developments. The government also reduced the minimum amount of land required for foreign-direct investment from 100 acres to 25 acres.

This cleared the path for foreign investment to meet the demand into development of the commercial and residential real estate sectors. It has also encouraged several large financial firms and private equity funds to launch exclusive funds targeting the Indian real estate sector

“The NRIs can invest in both residential, as well as commercial properties in India. There is no restriction on the maximum number of properties that can be bought,” Ansal said. “NRIs also get full support for the finance required for the purchase of the properties.”

India’s real estate sector has grown substantially in recent years as foreign investors have sunken huge sums of cash into the market. Merrill Lynch forecasts that it will grow from $12 billion in 2005 to $90 billion by 2015. The run-up in prices has attracted heavyweight financial firms like Morgan Stanley, which invested $68 million in Mantri Developers, a midsized construction firm in Bangalore, and Merrill Lynch, which invested $50 million in Panchsheel Developers, a regional builder. Foreign companies have also poured money into funds that invest in Indian developers. GE Commercial Finance Real Estate, for example, has invested $63 million in an $800 million fund that is building IT parks, and the California Public Employees Retirement Fund and the Oregon Public Retirement Fund have invested $100 million each in the IL&FS India Realty fund.

Real estate funds set up to invest only in India have already raised more than $2.7 billion. And new funds worth as much as $4 billion are being planned by J.P. Morgan, Britain's Knight Frank, and other foreign investors. Warburg Pincus, the largest private-equity investor in India, says it is spending nearly a third of its time studying opportunities in this area. And Deutsche Asset Management recently hired someone to head its real estate activities in India.

“Real estate in India is attracting NRI investors not necessarily for speculative purposes, but to acquire strong assets that will give good returns,” Manmeet Sikka, Goodwill Capital president, said, adding that nonresident Indians should stick to investing in a variety of infrastructure projects like roads and bridges in urban areas, construction of residential and commercial projects, development of townships at the city and regional level, and other participatory ventures.

(via Indus Business Journal)