In the current U.S. economic scenario and ongoing global markets’ turmoil, Morgan Stanley (NYSE:MS - News) plans to venture funds in India. According to Reuters, the global real estate fund of Morgan Stanley might invest in a residential project in Mumbai, India.
According to the source, Morgan Stanley is expected to enter into a deal with Mumbai-based Sheth Developers to invest $100 million to $125 million in the project.
Precisely, last year, Sheth Developers acquired an 18-acre land in Andheri, Mumbai from Borosil Glass Works. The land was purchased for approximately INR 8.75 billion. Since then, the Indian firm has been planning to develop a large residential project on that land.
For the last three years, Morgan Stanley fund has restrained itself from investing in India. Prior to that, the company has invested about $750 million in India. Completion of the latest deal will be a renewal for Morgan Stanley for investing in India.
In October, a group of investors including Morgan Stanley and the Government of Singapore Investment Corp were involved in a deal to purchase a Mumbai property from Indian textiles firm Alok Industries for approximately $200 million. The terms of the transaction were not disclosed.
Despite some short-term anxiety in the capital markets as 2011 began, the fundamentals were promising for private equity investments in India. A disparity in supply and demand is creating inflationary pressures, leading to rising interest rates, which is mounting pressure on corporate earnings. Therefore, Indian developers are feeling the pressure from the rising interest rates.
Moreover, in the first nine months of 2011, private equity investment in Indian real estate was slightly down to $784 million compared with $817 million in the prior-year period, according to the source.
We expect new capital investments from Morgan Stanley to reap benefits to the firm over the long-term. Moreover, offshore investors are in advantageous position as they face less restrictions investing across sectors and are deprived of intricate tax and legal burdens.
Morgan Stanley currently retains a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating. However, among Morgan Stanley’s peers - The Goldman Sachs Group Inc. (NYSE:GS - News) retains a ‘Strong Sell’ rating.
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