BANGALORE: In one of the largest investment deals in the Indian real estate sector, sovereign wealth fund Qatar Investment Authority (QIA) is investing $300 million ( Rs 1,800 crore) in Bangalore-based real estate developer and South India's largest office space builder RMZ Corp, said three people with direct knowledge of the development.
"The deal is in advance stage. QIA has committed to give money, and it will be based on project requirements. The investment will be equally split into a combination of equity and debt," said the first person.
The money will come into the same special purpose vehicle (SPV) where private equity fund Baring Private Equity Partners (BPEP) had invested 500 crore last year. BPEP has a 28% stake in the SPV, which is a group company of RMZ, while the rest is held by the builder. In 2012, BPEP backed the builder to buy 50-acre or 6 million sq ft space for office development in Bangalore.
"QIA will invest in the same SPV as BPEP and will back RMZ to buy IT parks worth 3,000 crore. Jointly, both partners will look at acquiring commercial spaces across Bangalore, Hyderabad, Chennai and Pune. RMZ has already identified the project and the money is expected to be deployed by March 2014," he said.
Raj Menda, managing director RMZ Corp, could not be reached for comment, while an email sent to QIA remained unanswered.
QIA has a track record of investing in different asset classes, including listed securities, property, alternative assets and private equity across major capital markets as well as emerging markets. The Doha-headquartered fund had earlier said real estate is a key area of investment, and it is willing to invest $10 billion over the next few years.
The family-owned RMZ Corp with a portfolio of over $3 billion is also looking to list its office properties by 2015 through Real Estate Investment Trust (REIT) in markets such as Singapore and Thailand. Currently, the firm has 84 lakh sq ft of office space across India, with additional 60 lakh sq ft under development. "RMZ is looking at a portfolio of 20 million sq ft of office space under its portfolio before it goes for listing. The company needs to have a sizeable portfolio for listing its assets," said another person.
Many sovereign and pension funds are planning to invest directly in real estate projects in a bid to get higher returns and direct control of the projects. Recently, Abu Dhabi Investment Authority (ADIA), which manages the surpluses the Gulf Emirate earns from oil exports, appointed Kotak Realty Fund to invest on its behalf, followed by Oman's State General Reserve Fund's investment in HDFC Property Fund, the private equity arm of Housing Development Finance CorporationBSE -0.27 % (HDFC).
"Sovereign funds are long-term driven and conservative in return expectations compared to private equity or hedge funds. These are cheaper, low-risk and low-return capital," said Ambar Maheshwari, managing director - corporate finance, Jones Lang LaSalle.