INDIA - Deutsche Bank property subsidiary RREEF has entered the Indian market with a $70m (€47.6m) indirect investment in residential developer Golden Gate Properties.
The investment - for an undisclosed stake in the firm - will target residential development in Bangalore and Hyderabad - both large IT centres and recent recipients of significant foreign direct investment (FDI).
Notably, the firm will bypass high-end housing in favour of middle-income apartment blocks.
"This is not a new trend," said Kurt Roeloffs, RREEF's regional CEO. "Much of the interest in high-end residential is due to the flood of liquidity that came from wealth created in the stock market. We think this comes and goes and is based on stock market cycles. Middle-income homes, on the other hand, have played and will continue to play a prominent role in the development of the Indian economy and for the middle class. We think that this is a more stable investment strategy."
The Deutsche subsidiary pointed to "strong and growing demand" for middle-income housing among both local and overseas employees, notably in IT centres.
"Both Bangalore and Hyderabad are driven by the IT and business process outsourcing [BPO] sectors, which have led to the formation of high-paying jobs and an emerging middle-class segment. The fundamentals of these two cities for long-term investment in residential sector are very good," said Roeloffs.
However, amid credible rumours of consolidation in the short term, at least one major overseas BPO player is understood to be rethinking its significant presence in a market once sold on its fast-disappearing labour arbitrage advantage.
RREEF said it chose indirect investment not only because direct investment would have meant assembling a landbank of sufficient size but because shareholding also offers project diversification.