New York City based private equity giant Kohlberg, Kravis, Roberts & Co. (KKR) has made its first move into the Indian real estate market, according to a report in The Economic Times. While India overall as an investment destination has lost some of its appeal as an emerging market in recent years, the real estate marketplace in the country is expected to remain a lucrative for many years, particularly as new builds and demand for both commercial and residential space continue to grow.
The Economc Times reports that KKR has made a total investment in the region of $12million, investing in a developing township project in Bangalore and a luxury home project in the upmarket west central area of Mumbai. Wadhwa Group, who are leading the Mumbai development, plans to use the investment from KKR to repay lenders that have contributed to the project thus far.
The township project in Bangalore is expected to take from 7 – 10 years to complete, and the investment is a sure sign of KKR’s belief in the Indian real estate marketplace.
A source told the Economic Times, “These two investments represent KKR’s commitment to participate in India’s long-term growth story for the sector. The idea is to do investments in a calibrated manner with high quality partners.”
The Economic Times approached KKR, whom declined to comment, while Wadhwa Group, and The Bhartiya Group – whom are involved in the Bangalore township development – did not respond to requests for comment.
While making its first investment is a ground breaking move from KKR, the announcement comes as rival private equity firm Blackstone Group were revealed to be second largest owner of office space in the country, behind only DLF, the native real estate giant.
Blackstone has invested a total of around $700million in commercial space in India, and owns an estimated 20million square feet of office space, demonstrating not only how far KKR will need to go to become a rival, but potentially the missed opportunity firms that aren’t yet present in India have passed up. There is the possibility that KKR are deliberately targeting the residential sector and don’t plan to explore commercial potential.
It is also worth noting that focusing on real estate is new to KKR, who had previously been exclusively focused on leveraged buyouts around the world. KKR isn’t entering real estate markets blind, having started to assemble a team of sector experts and hiring Morgan Stanley’s Ashish Khandelia last year, having previously brought Ralph Rosenberg into the firm as head of real estate in 2011. Rosenberg was responsible for $1.5billion of private equity fundraising for investment in western real estate initiatives in 2013 alone.