Nine years after it was formed, New York-based Brahma Management has lined up big investments for the Indian real estate market . Brahma, an FDI-funded investment and asset management company, has already invested around Rs 2,500 crore in the sector and has plans to put in another Rs 3,000 crore over the next two years.
So far, its investments in the realty sector include Gurgaon-based projects Brahma City and Athena, and The Valley, a joint venture township project in Panchkula. While Athena is a retail and commercial office center, Brahma City is a gated township spread over 150 acres of land.
Indian real estate market has been facing strong headwinds over the past several quarters due to low demand and oversupply in both residential and commercial segments. Gulbir Madan, chairman of Brahma, thinks differently. He says that India is coming out of a cyclical downturn. "We are just coming out of a real estate recession. The largest wealth creator in India will be real estate. I am very bullish on the sector," says Madan adding that in the US, the single-family homes are the biggest wealth holder, more than bond and equity markets. "Whenever you have a real estate recession, it affects the country dramatically. One of the biggest shortfalls in our country will be real estate."
Madan says that there are multiple roadblocks for the sector, including the recently introduced land acquisition act. "I think it will become very difficult to acquire large tracts of land. To acquire land for a project like Brahma City will be extremely tedious," he says. Madan says that he is fortunate to have acquired land (for Brahma City) back in 2009 and 2010. "Going forward, it will be practically impossible to make townships unless developers move out of the cities. But they have to wait for the infrastructure to come up."
"Real estate projects elsewhere in the world succeed because they have 10-lane highways. People can travel 30 miles out which will take them 30 minutes. They are not constrained in a city. It becomes too difficult to move out 30 miles here. That's why the pricing gets skewed," explains Madan.
With a big presence in Gurgaon, the fund is now planning to foray into other markets such as Bangalore and Mumbai. "We don't buy things for appreciation. We don't expect booms. We buy things to make a business return out of it." Brahma also claims to be a debt-free company. "The problem in India is that half of the developers are levered. I get projects constantly which are half done and they cannot complete it because they are out of funding. They offer us projects. None of my projects have any funding because the cost of money is around 15 per cent. We have put in all our equity," says Madan.