In yet another example of European funds looking at alternative investments like real estate in emerging markets, German institutional investor SachsenFonds has inked a pact with Mumbai-based real estate investment fund, Trikona Capital to invest $160 million in its ongoing realty projects.
Under the agreement, SachsenFonds, which has $7.47 billion of assets under its management, will acquire stakes in some projects owned by Trikona's AIM fund Trikona Trinity Capital and the two groups will co-invest in new projects.
The sale of stakes in existing projects would be valued at around $126 million, and $34 million would go to new projects, according to the agreement that is expected to close at the end of April. The agreement also includes in principle a third deal later in the year, which could boost the total partnership to about $400 million.
The agreement is in keeping with Trikona's plans to invest $1 billion in India every year, for the next 10 years. In December last year, Trikona had sold stakes in four projects for about $64 million to Sachsen.
"The agreement attains significance as Sachsen invests money only in those projects that are under construction. They are willing to pay a premium if they see profits accruing from it," said Aashish Kalra, Co-Founder and Managing Director, Trikona Capital.
Trikona Capital had recently received approval for a Special Economic Zone (SEZ) comprising a development of 10 million square feet of space at Greater Noida. The other projects wherein the fund has invested its money are townships, special economic zones, hospitality projects and malls in Mumbai, Gurgaon, Thane etc.
However, despite its ambitious plans for the country's real estate sector, Kalra maintains that investing in India is still very difficult.
"The only way to survive in the Indian market is to either formulate one's own business plan or to find a way to buy at your price rather than at the prevalent market rate. The opportunity in India lies in execution — the ability to convert ideas into an operating company or a development project and from there, into cash," he said.