In India, a stream of well-intended but unfulfilled plans to get real estate investment off the ground brought about the saying: in the country, REIT stands for Real Estate Investment Tour. Craig S. Phillips, former global head of securitized products at Morgan Stanley, said he has seen enough of the country to persuade him that India's southern region is finally ready to support a meaningful investment of capital.

Phillips formed Ptarmigan this month, an alternative asset management firm that will focus on Indian real estate investments, including private equity investments. Phillips expects the firm to launch its first fund in the third quarter.

Recognizing a need for investment to expand the country's real estate infrastructure, Indian lawmakers changed its laws two years ago, allowing foreign entities to buy real estate in the country, Phillips said. Although India's economy has been posting strong growth in the last several years, capital flows to real estate have been very disorganized, he added.

Yet in the last couple of years, foreign capital has gotten a better footing there, and has begun to create a private equity business model for India. It is still early to invest in India, and Ptarmigan aims to capture some of that growth, said Phillips.

"Real estate values have a long way to appreciate, relative to where [they] are now and the underlying growth of the economy," he said. "There is a tremendous need for all types of real estate infrastructure."

A lot of so-called green field' development is underway in Southern India, comprised of office buildings designed to accommodate thousands of educated and affluent workers. Those middle class professionals might eventually demand nearby housing, and then services via other types of real estate, such as hotels, schools and shopping malls, particularly.

"India's southern region ... is experiencing significant economic [growth] and an unprecedented level of demand in the residential and commercial real estate sectors," according to Phillips.

Toward that end, Phillips recruited RVS Rao, a former executive director of India's largest mortgage bank, Housing Development Finance Corp., to tap his long-term relationships in the Indian real estate business and be Ptarmigan's rainmaker in that market. Specifically, Rao will be chairman of Ptarmigan Capital Investment Advisors Private Ltd., working from the firm's headquarters in Bangalore. While at HDCF, Rao oversaw operations of service associates in several United Arab Emirates markets, and he is still a board member of several high-profile Indian companies, including Royal Orchids Hotels and Sobha Developers.

"The key to Ptarmigan's success in India will be its robust in-country staff with a broad network of local contacts and a sophisticated understanding of the region," according to a statement from Phillips. In a phone interview, he added: "Rao ... knows the developers and has been critical to the development of companies."

At least a dozen structured finance professionals have already joined Ptarmigan's Bangalore office. Among them is Prabhat Ojha, GE Commercial Real Estate's former risk manager overseeing the Indian market. He joined as managing director and COO. Phillips and Ojha worked together in the securitization group at Morgan Stanley.

As for its U.S. operations, which is headquartered Stamford, Conn., Ptarmigan is close to announcing a recruit for a major partner, Phillips said.

For all of its potential, there are still several caveats to investing in Indian real estate, lest anyone picture a vast unclaimed territory awaiting pile drivers and buildings that fuse modern and ancient architecture.

The Indian real estate market is fragmented. Government entities, families, private businesses and farmers own most of the land with development potential. There is a lack of transparency, and professional practices can be enormously different from what Western capital markets deem customary.

Phillips, however, sees a lot of upside to the market and says the timing is right.

"Large firms, while they have an interest, are not yet [highly] organized," he said.

(c) 2007 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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