China's Country Garden seeks stake in Indian homes project
China-based Country Garden Holdings wants to buy a controlling stake in a suburban-Mumbai residential project run by India's Wadhwa Group. Country Garden, China's third largest builder by sales, is looking to purchase the stake in the 450-acre development at Panvel in Navi Mumbai. The companies have reportedly signed a memorandum of understanding and term sheet for the transaction. If the deal goes through, it will be Country Garden's first investment in India.

Mumbai: Country Garden Holdings Co. Ltd, China’s third largest builder by sales, is in talks with Mumbai-based Wadhwa Group to buy a majority stake in its upcoming 450-acre residential township at Panvel in Navi Mumbai, two people aware of the development said.

If signed, this would be the Hong Kong Stock Exchange-listed company’s first Indian investment.

According to the first of the two people cited above, the two companies have held several rounds of talks in the past few months and signed a memorandum of understanding and term sheet for the transaction. Due diligence could take two more months, this person said on condition of anonymity.

While the value of the deal could not be ascertained, Wadhwa Group has already invested over Rs600 crore to buy the land and has been looking to raise an additional Rs500 crore to start building the first phase of the planned township.

Country Garden did not reply to emails sent on Friday seeking confirmation. A Wadhwa Group spokesperson confirmed by email that the company is talking to Country Garden but said it is still “early stages of discussions" and declined to give details.

Located at Panvel in the satellite city of Navi Mumbai, the township is planned to be built in various phases. The first phase would be spread across 145 acres and is expected to have around 2,500-3,000 apartments costing Rs21 lakh to over Rs50 lakh per unit, the company had earlier said.

“Among the Chinese firms looking to invest in India, Country Garden has been one of the most aggressive, having already set up offices, built operational teams and hired people to the tune of hundreds including lawyers, architects and consultants," said the second person, also speaking on condition of anonymity.

Earlier this year, the South China Morning Post reported that Country Garden is looking for investment opportunities in India and plans to acquire at least one residential land parcel by the end of 2017.

Last year, the Chinese developer set up its first India office at Bandra Kurla Complex (BKC) in Mumbai and hired around 175 people to handle operations in western and southern India. It has also set up separate offices for the eastern and northern parts of the country.

“Different Chinese companies have taken different routes and strategies to enter India. Country Garden has taken a more regional route where they’ve got a lot of people trying to tap the local market," the person said.

In western India, the firm is also in talks with developers including Kolte-Patil Developers Ltd for a strategic partnership, according to a person in the know. Kolte-Patil’s group chief executive officer Gopal Sarda declined to comment.

The Guangdong-based firm, which clocked sales of RMB 309 billion (around Rs3.02 trillion) last year, operated 728 projects under different stages of construction in China, Malaysia, Australia and Indonesia as of 31 December 2016, according to its annual report.

Other prominent Chinese developers planning investments in India include China Fortune Land Development (CFLD) and Dallian Wanda Group Co Ltd.

“India’s country dynamics are very similar to China’s. To that extent, Chinese builders understand India far better than Western developers. They understand it’s a regional play and have the experience of working in a large country which could have multiple levels of bureaucracy, state governments and central government," said Shashank Jain, partner, transaction services, PricewaterhouseCoopers (PwC) India.

The government’s Housing for All 2020 initiative and regulatory reforms in the past year have raised interest among foreign developers and private equity investors. Despite a slump in the residential market, India’s growing economy and housing needs have continued to attract opportunities for large scale residential developments both in tier I and tier II cities.

“The government’s stated intention of affordable housing has set the stage for significant scope for large scale development and expansion. The Chinese developers have proven their development and construction capability for massive large scale projects in China. Secondly, with the Chinese economy slowing and an ongoing overcapacity around housing in China, India offers an opportunity to expand their business," Jain said.