Warburg Pincus, India’s Runwal Group to build malls

Warburg Pincus, a US private equity firm, and Runwal Group, a Mumbai-based real estate developer, have entered into an agreement to develop commercial properties around India, primarily shopping malls

May 20, 2019

Each of the partners will contribute US$200 million in equity and raise an additional US$600 million in debt to build a US$1 billion corpus

The Indian real estate space has drawn private equity investments worth US$15.9 billion, including equity and debt, between 2016 and 2018

India’s real estate sector is expected to touch US$180 billion by 2020, with commercial real estate being at the core of investor interest

Warburg Pincus’ latest Indian project marked its debut into the local commercial real estate space, following residential investments

Warburg Pincus LLC, a US private equity firm, and Runwal Group, a Mumbai-based real estate developer, have set up a joint venture to develop commercial properties across India, primarily shopping malls. Each of the partners will contribute US$200 million in equity and raise an additional US$600 million in debt to build a US$1 billion corpus. The venture will employ this fund to build large destination malls, as well as smaller hypermarket and theatre-based community malls in India’s tier-1, 2 and 3 cities that offer strong income potential owing to improving consumer affordability and awareness.

India has stood out as one of just two countries in Asia to draw investor interest in the real estate sector. The Indian real estate space has drawn private equity investments worth about US$15.9 billion, including equity and debt, between 2016 and 2018. Additionally, 50 per cent of this investment, or around US$7.3 billion, was attracted by commercial real estate alone, including offices and retail properties, as per real estate consultant Knight Frank India. Government initiatives to reform the real estate sector has been a major catalyst in attracting funding from foreign and local institutional entities.

India’s real estate sector is slated to grow at a CAGR of 30 per cent over the next decade. Large investors such as US-based Goldman Sachs, Blackstone Group and Brookfield Asset Management, Singapore’s GIC, Canada Pension Plan Investment Board (CPPIB) as well as the Qatar Investment Authority have invested aggressively in Indian real estate assets over the past years. Last year, Abu Dhabi Investment Authority backed Lake Shore India had announced plans to build malls across Mumbai, Gurugram, Ahmedabad, and Hyderabad. Real Estate Investment Trusts (REITs) have been a major enabler here.

US-based CBRE Group, the world’s largest commercial real estate investment firm, had said in its South Asia report that India’s top seven cities saw an addition of close to 2 million sq ft of space over the first half of 2018, led by the southern cities of Chennai and Hyderabad. The real estate sector is expected to touch US$180 billion by 2020, with commercial real estate at the core of investor interest. Herein, tier-2 and tier-3 cities have offered vast untapped markets. Warburg Pincus’ latest Indian project marked its debut into the local commercial real estate space, following residential investments.

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