Abu Dhabi Investment Authority (ADIA), one of the world’s biggest sovereign wealth funds (SWF), plans to invest directly in Indian real estate in an effort to diversify from its current strategy of ploughing money into the country through realty or private equity funds, sources familiar with the matter said.
ADIA’s investments in Indian real estate to date total $400 million to $500 million, largely through property and private equity funds, and the fund is now scouting for direct investment opportunities, one of the sources said.
The sovereign fund, whose assets range from Citigroup bonds to a stake in Britain’s Gatwick airport, is close to hiring a country-dedicated fund manager from a large private equity firm to look for real estate opportunities in Asia’s third-largest economy, the sources said.
ADIA recently invested $50 million in an India-focused real estate private equity fund run by Red Fort Capital, one of the sources said. In January, Red Fort said it planned to raise $500 million for its second India-dedicated property fund, of which it had already raised $80 million.
Red Fort officials could not immediately be reached for comment.
The sources did not give the name of the person ADIA is hiring and spoke on condition of anonymity as the matter has not been made public yet.
A spokesman for ADIA in Abu Dhabi declined to comment. Large sovereign wealth funds including Singapore’s Government Investment Corp (GIC) are keen to invest in Indian property as the country’s cash-strapped developers seek funds to kickstart development and reduce debt.
Debt held by Indian developers hit 1.8 trillion rupees ($35.74 billion) as of September 2011, according to a report by Infrastructure Development Finance Corp.
International private equity firms, which have invested $13 billion in the Indian real estate sector since 2005, are expected to exit from up to $5 billion of investments over the next couple of years, according to property consultancy Jones Lang LaSalle.
This will widen the funding gap for developers at a time when home sales are low and banks are cautious about lending to the sector.
GIC has been in talks with several Indian developers, including oil-to-steel conglomerate Essar Group’s real estate arm, Equinox Realty, and developer Godrej Properties, to invest in their projects.
ADIA has expressed “keen interest” in investing in the country, India’s Trade Ministry said in a statement in January, adding that it had agreed to speed up the creation of a joint working group to facilitate the fund’s investment.
Real estate investments constituted between 5 and 10 percent of ADIA’s overall global portfolio, according to its 2010 annual review. The real estate division is run by Bill Schwab, who joined the fund in 2009 from JPMorgan Chase.
North America and Europe accounted for a major chunk of the ADIA’s investments, with 60 percent to 85 percent poured into those regions. Emerging markets constituted about 15 percent.
The fund returned 7.6 percent on an annualised basis over a 20-year period as of Dec. 31, 2010, it said in its review.
While the ADIA does not disclose its net worth, analysts estimate its assets to range between $400-$600 billion.