After a decade of investing in real estate in India, global investment firm Xander Group Inc. is actively looking at fresh investments across retail, commercial office and residential sectors even as the country’s property market reels under a slowdown.
Over the past 10 years, Xander has invested over $2 billion in equity in real estate in India from its various platforms. Xander, which builds retail shopping malls under its development arm Virtuous Retail, has financed residential projects through a series of real estate funds and engages in debt lending through its non-banking financial company (NBFC) Xander Finance.
With the National Democratic Alliance government relaxing foreign direct investment (FDI) norms earlier in November, international investors such as Xander are finding newer and easier ways of investing in real estate.
“We are very excited about it. FDI rules with regard to smaller projects make it very interesting because they allow us to do more retail. Size is no longer a constraint so I can now do community centres. Instead of a 1 million sq. ft project, which takes 6-7 years or more, now we can do 100,000-150,000 sq. ft city centre community spaces. That can be the rollout strategy across the country, and not just the top 10 markets. We can also buy existing assets, which is small, because there isn’t much to buy from,” Siddharth Yog, founder of Xander Group and chairman of the investment committee, said.
With the latest easing of FDI regulations, any project regardless of size which is under construction can have access to FDI. Foreign investment can now be brought into the construction sector in any amount and for any size of project. The government has also permitted 100% FDI under the automatic route in completed projects.
Under Virtuous Retail, which was launched in 2007 with a commitment to invest $600 million to build top quality retail spaces across cities, the firm has so far launched a mall in Surat and has recently opened another in Bengaluru. Under development are three more malls—in Chennai, Pune and a second one in Bengaluru—that will all be operational by 2017.
“We have invested over $450 million in Virtuous Retail so far and didn’t invest all the equity because we couldn’t find the right things to invest in. I’m in the market looking at opportunities to buy things that we like, at the right price and which are legal,” said Yog, who is also founder and chairman of Virtuous Retail.
Dearth of quality retail real estate has been an ongoing challenge for most retailers in India who have had to look at high streets or hold on to aggressive expansion plans. According to a 30 July note by property advisory Jones Lang LaSalle India, at least 14 malls with a combined space of 3.5-4.5 million sq. ft are likely to withdraw from the market in the next 12 months.
Joining Xander are a slew of global investors such as Government of Singapore Investment Corp. Pte Ltd, Warburg Pincus, Goldman Sachs Inc., Blackstone Group Lp. and Canada Pension Plan Investment Board, all of which are actively eyeing investment opportunities in real estate here.
Private equity funds invested about $2.4 billion in the real estate sector, across 53 transactions, during the first nine months this year, surpassing the full-year investments of $2.1 billion in 2014 across 80 deals, according to data from VCCEdge which tracks investments.
Apart from retail shopping malls, Xander is also actively looking at buying commercial office assets. In 2014, Xander Group and an investor consortium led by Dutch pension fund asset manager APG Asset Management NV said they will invest $300 million through a venture that will buy income-generating, commercial office assets in big Indian cities.
On the residential front, Xander is in the last leg of investing from Xander India Opportunity Fund IV, a $250 million fund which was raised a couple of years ago. There could be a Fund V, but Yog said Xander always has different pockets to invest from. “I want to invest as much as possible. I have sufficient capital on hand but can I find the compelling opportunities that meet my risk threshold?”
“Xander is one of those few investors that has a complete suite of offerings. Its debt platform or NBFC is a frontrunner in successful real estate lending. Having invested in India for so long, it has seen full cycles of investments and therefore has a good mix of what domestic funds bring to the table along with the advantages of a global investor,” said Shashank Jain, partner, transaction services, PricewaterhouseCoopers India, a consultancy firm.