Rutley Capital Partners, the real estate private equity arm of property consultancy Knight Frank, has unveiled plans to launch Rutley Indian Property, a fund that will invest predominantly
Rutley Capital Partners, the real estate private equity arm of property consultancy Knight Frank, has unveiled plans to launch Rutley Indian Property, a fund that will invest predominantly in Indian residential real estate. The fund is seeking USD300m in its initial fundraising with an eventual target size of USD1bn.
The fund will target an internal rate of return exceeding 20 per cent over the seven-year life of the fund, which will invest in residential and mixed-use developments in cities including Chennai, Bangalore and Pune. A USD1bn project pipeline has been identified off-market and is currently under negotiation.
The fund will be managed by Rutley Capital Partners, assisted by a newly-established office in Mumbai staffed by senior former management of Knight Frank India. The group’s network of five Indian offices with 650 real estate professionals is intended to provide access to local market knowledge, deal flow and project management expertise.
Rutley argues that the case for investment in the Indian residential sector is supported by compelling macroeconomics. India has witnessed sustained GDP growth exceeding 8 per cent a year, partly thanks to international businesses offshoring service functions to cities such as Bangalore.
India is now ranked as the world’s second most attractive location for foreign direct investment behind China. The rapid growth in the middle classes (forecast to comprise 40 per cent of the population by 2025), combined with accelerated rural-urban migration, has created unprecedented demand for newly-developed residential property in the larger urban centres.
There is an estimated shortage of 24 million residential units throughout India. With mortgage penetration currently representing only 3 per cent of GDP, the prospects for capital value appreciation over the medium term are promising.
‘The macroeconomic case for investing in Indian residential real estate is compelling,’ says Rutley partner Colin Davis. ‘Demographic pressures and wealth creation combined with foreign investment has led to a huge expansion in the demand for middle-class housing.
‘The fund will seek to capitalise on this opportunity. Rutley Capital Partners’ local presence and association with Knight Frank India combine to provide access to deal flow and market knowledge, offering the fund a competitive advantage.’