Sabeer Bhatia (who made his fortunes selling Hotmail to Microsoft) is now negotiating with private equity firms to raise funds for his proposed Nano City. The city is proposed to be developed in Haryana under a private/public partnership between Bhatia and the state government, which approved the project in September 2006. Bhatia's Nanoworks Developers will hold a majority stake in the finance authority for the joint venture.

Earlier, Bhatia had planned to raise $300 million from Indian banks but given the credit crunch which has specially hit the construction sector, the project is facing serious roadblocks. As a result, Bhatia is now talking to funds outside India to bankroll the project in which he has invested $10 million-plus of his own money.

Among those who have been approached include UK-based private equity firm 3i, which recently raised a $1.2 billion India infrastructure fund, as per this report.

The city which was projected to absorb close to $5 billion was scheduled to see the first batch of its projected 5 lakh people, plus its first university and small businesses, to be running by 2010. Given the fund raising problem, the project is now pushed back by atleast one year and is unlikely to see the first phase of the city with modern world frills like alternative energy, open space and modern mass transit, before 2012.

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