India's Primary Real Estate plans $500 mln fund

By Dominic Whiting, Asia property correspondent

HONG KONG (Reuters) - Indian fund manager Primary Real Estate Advisors is planning to launch a fund worth as much as $500 million, probably in the second half of this year, but said it will tread carefully as the country's property boom stutters.

Foreign investors have taken advantage of such funds to rush into property development in India since it eased rules on inward investment in the construction industry in early 2005, sparking rampant land speculation and a near quadrupling in prices.

But despite signs of a slowdown -- home sales volumes have fallen by one-fifth in Mumbai and 40 percent in Bangalore in the last year -- the head of Primary Real Estate, Ashwin Ramesh, is convinced that North American and European investors will invest.

"There are certainly cowboys out there," the Indian fund manager told Reuters in a telephone interview. "But our style is more focused for a risk averse environment."

"We would typically underperform in a raging bull market but overperform in a flattish market."

Ramesh expected to launch the new fund within six months to a year, and hoped to raise between $300 million and $500 million.

"At the moment there's interest in North America and London, but we're in touch with people all over the place," he said, adding that he was busy expanding a team that is now investing a $32 million fund closed in mid-2007.