Deutsche Bank's arm to foray into India's realty market with $1 billion investment

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The new venture, RREEF India Advisors, which will be run by country head Kishore Gotety, will be eyeing potential real estate deals.

"We are working on deals involving roads, power, airport and railway terminal projects," Gotety said, adding that a team of six will be advising the new venture on real estate and infrastructure deals.

"Our preferred deal size would be between $50 million and $150 million and we are evaluating deals in western and northern India," he said.

"It's known that India needs more than $450 billion in investments for developing infrastructure," said Kurt Roeloffs, CEO (Asia Pacific), RREEF. "We have plans to invest over $1billion in India across the real estate and infrastructure sectors over the next three years. We think India will be an attractive emerging real estate and infrastructure market for our clients."

However, RREEF does not have an India-specific fund in place and the money will be drawn from its international funds. "At present, we have two Asian funds dedicated to Japan and China. In the future, we may look at having an India-specific fund," Roeloffs said.

"We could also launch an India-dedicated fund in the future, but the strategy will unfold as the markets unfold," he added.

In a related development, RREEF said it has acquired a 60 percent stake in a $400 million mixed-use real estate project that will be jointly developed with a unit of Nagarjuna Construction Co. in Hyderabad. The project, scheduled to be completed in five years, will involve construction of residential, commercial and hotel properties. "Hyderabad has some strong advantages like a good real estate growth stemming from a booming IT and outsourcing industry. Also, infrastructure development has kept pace with the growing real estate market due to a proactive government," Gotety said.

Earlier, in January, RREEF invested $70 million in Bangalore-based real estate developer Golden Gate Properties for an undisclosed stake.

However, RREEF is not alone. It will be competing with London-based 3i Group, which recently closed a $1.2 billion India-dedicated infrastructure fund, US investment banks Goldman Sachs and JP Morgan Chase & Co., and Citigroup, which has partnered with US-based buyout firm Blackstone, Infrastructure Development Finance Company Ltd (IDFC) and India Infrastructure Finance Company (IIFCL) in launching a $5 billion infrastructure fund.

US-based private equity real estate firms Walton Street Capital and Starwood Capital and a slew of Middle East-based real estate developers are also in the fray, having already tapped the Indian market and partnering with local firms in developing multi-billion dollars residential and commercial projects over the next five years.

RREEF's announcement comes close on the heels of an alliance formed between the State Bank of India and Australia's Macquarie Capital earlier last month to raise $2 billion to fund infrastructure projects.

Lack of adequate housing in India has led to a sharp rise of real estate prices in India over the last few years, drawing a large number of foreign participants including private equity funds to India.

The India Brand Equity Foundation estimates that by 2010, the information technology (IT) sector alone will need 150 million square feet of space across major cities, and further estimates that in the residential sector, there is a housing shortage of 19 million units across the country.

While the Indian government has estimated that the nation will need about $500 billion between 2007 and 2012 to modernize its infrastructure, global consultancy firm Ernst & Young reported last November that private investment to build India's infrastructure will top $100 billion by 2012.

ABOUT RREEF

RREEF Alternative Investments is the largest alternative investment manager in the world, managing $91.3 billion of assets globally. Its business in the Asia-Pacific region has grown considerably over the last two years, and now comprises for 15 percent of total assets under management.