June 25, 2007 / 11:02 AM / 13 years ago

Reuters Summit-Tishman Speyer JV eyes new India property fund

(For other news from the Reuters Real Estate Summit, click here)

By Dominic Whiting

SINGAPORE, June 25 (Reuters) - An India joint venture between private U.S. real estate firm Tishman Speyer and ICICI Bank (ICBK.BO) could tap global investors to raise a new fund, a company executive said on Monday.

Brushing off fears that a property bubble is forming in India, the chief executive of TSI Ventures, Kok Huat Goh, told the Reuters Real Estate Summit in Singapore that his current $700 million pot was being spent fast.

“At the rate we’re going, it would be sooner rather than later,” Goh said of the prospects for a new fund.

TSI Venture’s current fund, raised from institutional investors by both sides in the 50-50 partnership, gives $2 billion of spending power when supplemented by borrowing.

But the firm is already committed to two Hyderabad projects, including a $2 billion township to house 30,000 people.

TSI Ventures now wants to quickly expand to the New Delhi area, Mumbai, Pune, Bangalore, Chennai and Kolkata.

“Our aim is to get into these cities in the next couple of years,” Goh said.

Since India eased rules on inward investment in the construction sector, foreign property funds have flocked in. This has helped double property prices in major cities since 2005.

An estimated $10 billion was raised internationally for Indian property funds last year.

Developers are hoping to tap hunger for new homes from young professionals. Disposable income has grown 12 percent a year for the past five years, according to CLSA.

But many analysts believe a property price correction of 10-40 percent is imminent because prices have risen too fast. The last time a property bubble burst in India prices slumped by as much as 70 percent between 1995 and 2001.

Goh said he expected price dips only in some areas, not nationwide.

“Fundamentals are extremely strong,” he said. “No one disputes the tremendous pent-up demand, but there are some short-term imbalances in demand and supply.”

Goh pointed to Bangalore, where he said low quality buildings sat empty while tenants rushed to fill top-notch offices, where rents were as much as 70 percent higher.

“There’s a load of grade-B stuff being built out there, but a huge, huge shortage of grade-A,” Goh said.

$1=.7425 Euro See www.reutersrealestate.com for the new global service for real estate professionals from Reuters For more stories from the Reuters Real Estate Summit, see [ID:nSP151663]

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