Friday, November 02, 2007

Indian companies seek markets abroad

Source: Financial Times: Indian groups look overseas for new capital

India’s property sector has been expanding rapidly due to India’s expanding economy. India’s property sector already has been growing by 30% a year. Indian real estate companies are now looking to alternate markets overseas for new capital. Indian developers have recently started to consider listing real estate trusts abroad. Indian companies anticipate raising hundreds of millions of dollars through such actions.

India’s central bank has been a factor in Indian real estate companies’ interest in overseas stock markets. The bank has established tighter controls on lending to real estate which has raised the cost of capital for Indian companies. As a result, companies are worried about the high cost of capital and are contemplating other markets outside of India. A partner at Ernst & Young in India commented “There is a need for capital at the moment, huge amounts of capital.”

However, companies who list realty trusts abroad must be prepared to deal with new or complicated regulations and requirements. For example, many Indian developers would not be able to list a real estate investment trust (REIT) in Singapore. To qualify for inclusion in a REIT, a property must be 90% complete. Many Indian projects are in the first phases of development and would therefore not qualify under such provision.

For Discussion:
Will India avoid a real estate "bubble" by increasing the cost of funds to real estate companies thereby forcing the companies to seek capital from other non-Indian investors?

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