After being three years on the top, India has finally lost its position as the most preferred destination among upcoming markets for retail investment, according to the 7th annual global retail development index (GRDI) by management consulting firm A.T. Kearney.

The GRDI ranks countries among the thirty emerging markets on the basis of their retail investment attractiveness.

Vietnam occupies pole position in 2008. The country’s leap from the fourth place in 2007 to the top spot this year was driven by strong GDP growth, changes in its regulatory structure favoring foreign investors and increase in consumer demand for modern retail concepts.

India, Russia and China —the top three countries in last year’s GRDI fell to 2nd, 3rd and 4tf places, respectively, in the 2008 GRDI.

While India, Russia and China remain important destinations, high real estate prices in big cities and growing competition have decreased the attractiveness compared with the last years and forced retailers to look for opportunities in Tier II and III cities.

“India continues to be a dominant force in AT Kearney’s annual GRDI report. While India has slipped to No. 2 this year, it continues to be a favored destination for global retailers. However, challenges such as skyrocketing real estate costs, a lack of good commercial property and complex regulations for foreign entry have caused the slide in ranking,” said Hemant Kalbag, principal (consumer industries and retail practice), AT Kearney India.

Vietnam’s twenty billion dollar retail market place is very small compared with India or China, but the absence of competition and an 8 %GDP growth make it an attractive opportunity for global retailers, says the report.

Moreover, the Vietnamese consumer is among the youngest in Asia, with seventy nine million below the age of 65. Moreover, the country’s consumer spending increased by more than 75 % between 2000 and 2007.

But all is not lost for India. The retail market opportunity here is larger than ever at $510 billion and spending patterns and consumer maturity are growing faster than what most retailers had forecast.

However, there are a few stumbling blocks that have emerged. Foreign players entering India today face stringent regulations, a clouded political atmosphere, soaring real estate costs and a fiercely competitive domestic retailer group, said the report.

Bollywood celebrities don’t just peddle dreams but also dream homes. Real estate developers are now banking on the star power of the likes of Shah Rukh Khan, Amitabh Bachchan and Aishwarya Rai to endorse their projects.

Deepika Padukone is the latest to join these marquee names. Aspire Real Estate, a Dubai-based developer, has signed up the actress as its brand ambassador. “We are targeting India, and Deepika will add to our brand equity,” said an Aspire spokesperson.

The trend of celebrities – from tinsel town and outside – endorsing real estate projects started around two years ago.

So while big banner draws such as Shah Rukh, Aishwarya, Bachchan or even sarod maestro Amjad Ali Khan and his sons represent the likes of DLF, Sahara and Omaxe, a host of smaller developers too have started signing up celebrities to cut across the clutter.

Thus, Pune-based Brahma Developers uses actress Katrina Kaif to promote its SunCity project, Chandigarh-based LVL City has signed up cricketer Yuvraj Singh, Chadha Group has former cricketer Kapil Dev, AEZ group has actress Perizaad Zorabian while small screen star Shweta Tiwari of Kasauti Zindagi Ki fame was the brand ambassador for Gaursons Developers.

Omaxe executive director Vipin Agarwal says star endorsement was imperative in the highly competitive realty sector.

“The celebrity not only gives the product greater recognition among the target audience but also helps the brand to connect with the customer, thus increasing the brand acceptability,” said Agarwal.

“All real estate campaigns focus on similar amenities. The tag ‘world class amenities’ is now clichéd,” he said. “Stars help a project stand out in an overcrowded market.”

Also, developers feel that hiring a star can give a boost to the sale of residential projects, with the sector witnessing a slowdown of up to 25 % since January this year.

The trend is not restricted merely to big developers or the metros.

Kochi’s Jairaj Projects has roped in Malayalam film star Jayaram; SRK Constructions has singer Yesudas, cricketer Rahul Dravid endorses Skyline Housing, while another cricketer, S. Sreesanth, promotes the Kochi-based Mather Builders.

Mumbai-based Sunil Mantri Realty Ltd plans to invest about hundred million U.S. dollars to participate in the development of Bandar MSC Cyberport in Kulai, the first Multimedia Super Corridor (MSC) cybercity in Malaysian southern Johor state. This is for the first time that an Indian company is investing in malaysia cybercity. The company signed the MoU to jointly develop this more that one billion’s ringgit development.

MSC Cyberport chief executive officer Mr. Ganesh Kumar Bangah said, “The hundred million U.S. dollars investment from Sunil Mantri will be injected to develop Phase one of Bandar MSC Cyberport, covering a size of 13.2 ha. Work on the project is expected to start at the end of the year”.

Mr. Bangah said, “It will be a mixed development with residential, commercial and ICT spaces targeting the IT operations of MNCs, while developing local technology companies and technopreneurs.

State-run pharmaceutical corporations, struggling to survive competition with private sector companies, are now emerging in a new avatar as developers of commercial complexes and IT parks because of their massive land holdings.

The recently-revived Bengal Chemicals and Pharmaceuticals Ltd (BCPL) is building a 38-floor sky scraper at Worli in Mumbai overlooking the Arabian Sea. The new office complex at this two acre land in the heart of Mumbai will be ready in about 18 to 24 months.

The company intends to offer the space on a 99-year lease. Potential tenants have already pooled in money for the Rs 300-crore construction, it is understood. Public sector developer National Building and Construction Corporation (NBCC) is assisting BCPL in this venture.

Another state-run company, the Indian Drugs and Pharmaceuticals (IDPL), which is awaiting a revival package from the government is planning to leverage its vast real estate assets in Hyderabad, Rishikesh, Gurgaon and Chennai for developing large commercial facilities like software and biotech parks as well as educational institutions.

The ministry of chemicals and fertilizers is now seeking the approval of a group of ministers headed by defence minister A K Antony for this diversification.

IDPL has about 900 acres of land in Hyderabd, about 1,200 acres in Rishikesh, 80 acres in Gurgaon adjacent to Microsoft’s office and about 650 acres in Chennai, all at prime locations. These assets are considered worth about Rs 50,000 crore, which comes to about twice the turnover of the domestic retail pharmaceutical market.

The government does not want to sell these assets or divest its stake in the company. Instead, it wants to leverage these assets to create commercial complexes so that it would generate revenue without losing ownership.

These government-run pharma companies were making losses because they could not match the professionally-managed private sector companies’ swift decision-making and efficiency in marketing. Secondly, their focus is to provide medicines that are needed for the masses and not to produce high-end drugs that are outside price controls.

The real estate development ventures are likely to give them the much needed resources to meet their social objectives without seeking government assistance

Dubai-based real estate major Majid Al Futtaim (MAF) is likely to enter India for which it is in the process of identifying a local partner.

The country’s estimated 16 billion dollar realty sector, which has already attracted UAE-based players like Emmar, Limitless, Nakheel and SmartCity, has been identified by MAF as a ‘market to be in’.

The company is looking to tie up with a local player to build shopping malls, residential properties and other commercial spaces.

Majid Al Futtaim VP Business Development Younis Al Mulla told, “We are studying the Indian market and soon we are going to have a place in the country. India is the company’s target and we need to set up operations in the next one or two years,”

He said a team of senior company officials visited India in the month of March to evaluate various options and held talks with companies here.

“We are visiting India again in June to organise roadshows in major cities, including Bangalore, Delhi, Mumbai and also Goa,” he added.

Asked about the investments planned for India, Al Mulla said, “We do not know it yet as nothing has been finalised. We have not decided on that.” MAF also operates hypermarkets, in joint venture with the world’s second largest retailer Carrefour, in the Middle East, North Africa, Iran, Pakistan and other markets.

The company’s announcement comes at a time when, even Carrefour is likely to finalise its plan for India and announce its partnership with an Indian company. Indian real estate industry is currently pegged at about 16 billion US dollar and is estimated to post annual growth rate of 30 per cent to reach 60 billion dollar by 2010. The sector witnessed increased interest from several international developers, primarily from the Middle-East, South-East Asia and Europe.

MAF operates in spaces like real estate, retail, management of proprietary funds and has joint venture with some international companies to complement the existing businesses of the Group.

The primary focus for the MAF Properties is the development of shopping malls, hotels and mixed-use communities projects. The company operates seven shopping malls with a total retail area of 500,000 sqm in UAE, Egypt and Oman.

While, MAF Retail manages Majid Al Futtaim Hypermarkets, a joint venture company with the world’s second largest retailer Carrefour.

There are currently 26 hypermarkets in the Middle East. The Carrefour brand has expanded across the UAE and into Oman, Qatar, Saudi Arabia, Egypt, Jordan and Kuwait.

MUMBAI: Mauritius-based India Real Estate Infrastructure Fund’s first round of fund raising exercise will come to an end by June by which it plans to mop up one hundred million dollar.

Launched in January, the fund targets a mop-up of two hundred fifty million dollar from across the world for private placements in Indian real estate companies. Balance one hundred million dollar will be raised in the following closures.

“We plan to invest the money in unlisted Indian real estate companies under the FDI guidelines. We prefer to have weightage of up to 50 % in every company so that we can have a ‘say’ in the management. It will help us to drive the policies in the right direction,” said Arun Goel, CEO of DHFL Venture Capital India Pvt. Ltd, which has been mandated to create an investment portfolio on behalf of the fund.

The fund will invest in real estate companies pursuing projects in residential, commercial and hospitality domains which also encompass SEZ, IT parks, hotel.

DHFL Venture has appointed Mumbai based Yen Management Consultants Pvt. Ltd as financial advisor.

The fund will consider factors like the number of development projects in hand, FDI compliance, local presence and growth plans and execution in choosing the company.

Explaining the investment rationale, Goel said, “an increasing population and flourishing services sector have resulted in a number of green field projects to build residential and office buildings. Further, rising cost of hotel accommodations across major cities in India has led to high demand for ones with reasonable rates.”

Besides EU based countries, the fund is getting good response from Japan, the UK, UAE, said Goel, who expects the fund to give 25 % internal rate of return.

“We are getting tremendous response from investors across the board but some of them are currently buying time. They are taking stock of the situation in India. However, they will soon get involved in a 2-3 months time,” revealed Sunil Shirole, managing director and CEO, Yen Management Consultants.

“We strongly believe in the fundamentals of the Indian economy and its prospects. So we have no doubt about the success of the fund,” added Goel, who did not rule out the possibility of a mutual fund by DHFL in two years.

Berggruen Hotels is scaling up its plans for India and proposes to set up 8-10 four-star hotels, adding to the investments it has already announced to develop budget hotels, service apartments and resorts under the Keys brand name.

The upscale hotels will be established over 4-5 years, taking the company’s total investment in India to Rs 2,100 crore. “We launched operations in India in 2007 with budget hotels as this was the ideal segment to enter. We are now finalizing the upscale concept to be launched here, and the model will be replicated in the international markets,” chief marketing officer Partha Chatterjee said.

Berggruen Hotels is backed by New York-based Berggruen Holdings, which manages the personal investments of billionaire hedge fund guru Nicholas Berggruen. The investment will comprise $200 million in equity while the rest will come from borrowings, Mr Chatterjee said.

Construction of seven budget hotels is under way and work at eight more locations will begin this year. Berggruen had announced in 2007 that it was setting up 38 budget hotels in the country at an investment of $100 million.

The first budget hotel will open in January, 2009, in Kerala’s capital Thiruvananthapuram, while the first four-star property is expected to be operational a year later at Valsao beach in Goa.

Berggruen has roped in leading Japanese architect Shigeru Ban for the four-star hotels. “We expect to have around 4,500 rooms under operation by 2011,” Mr Chatterjee said, forecasting a turnover of Rs 350 crore by then.

Berggruen Holdings’ other investments in India include an equipment rental company, a vocational education provider, a car rental company, real estate development deals and investments in the stock markets.

Pacific Star International (Thailand) plans to bring more foreign funds to invest in the Thai property market as assets here can generate high returns at double-digit rates.
“They are global financial institutions, banks and insurance companies, who aim high and are happy to invest here. Investing in Thai properties could produce an internal rate of return of 15%,” Daniel Ross vice-president for business development and direct investment said.
The parent company Pacific Star Group from Singapore now manages five property funds including the US$250-million Asian Real Estate Prime Development Fund, which was set up offshore to invest in property markets across Asia. The fund initially had a policy to allocate ten percent of total assets to Thailand.
Among the money poured in the Thai real estate market, some went to two joint ventures with SET-listed Asian Property Development (AP).
“We’re looking to raise more funds and expand the fund size to four hundred million dollar in a few months,” Mr Ross said.
Pacific Star International is now studying two or three possible deals, which would be settled within this year. It also plans more ventures with AP in the future if any interesting projects arise.
Mr Ross noted that the company was interested in developing new hospitality projects in prime destinations such as Samui and Phuket. Wealthy investors, particularly from the Middle East, are very interested in owning beachfront resort villas in the kingdom.
Pacific Star International is currently involved in four projects. Two are joint ventures with AP while the other two, Sathorn Gardens and Eight Thong Lor, are being developed on its own.
Urasate Navanugraha, the company’s assistant vice-president for asset development, said the four projects were progressing well. Sathorn Gardens has just finalized sales of hundred units in the first phase and 20% of ninety five units in the second phase have been reserved.
“We expect to sell out all units in the second phase by September. After that, we will decide what to do with the remaining one hundred fifty five units based on market situations,” he said.
The property company plans to stage road shows in Hong Kong, Singapore, Dubai and India over the next five months to promote Sathorn Gardens, two 41- storey condominium buildings. The average selling price is 100,000 baht per square metre.
The Eight Thong Lor mixed-used project launched presales of condominiums early this year with a 40% booking. The project would have 5,000 sq m of retail space, a serviced-apartment zone and residential condominiums. Construction is expected to be completed by the middle of next year.