JPMorgan has been in India in one form or another for more than 70 years.
So, when JPMorgan Asset Management executives began to raise an India real estate investment fund — the $360 million JPMorgan India Property Fund, which closed in August — they were in familiar territory and aware of the risks.
India's expected growth is enticing a number of real estate investment managers to invest there, but few global real estate investment managers and consultants talk about the drawbacks. Some of India's foreign investment rules may have been loosened last year, but other restrictions remain. Foreign investors may invest only in development deals and must keep their money in the deal for three years, said Arvind Pahwa, managing director of JPMorgan Asset Management Real Estate; Mr. Pahwa is based in Mumbai.
JPMorgan is undeterred by the downside. There are a number of development projects in India, and they expect new groups of buyers for the completed developments, said Joe Azelby, managing director and global head of JPMorgan Asset Management's real estate business.
"Today, there is very, very strong demand for high-quality domestic real estate with cash flow," Mr. Azelby said.
"There are high-net-worth individuals in India who are looking for completed projects that produce stable returns," said Mr. Pahwa. "There has been a tremendous demand for real estate across all segments."
Many also expect the Indian government to loosen restrictions soon on domestic pension funds investing in real estate, he said. In two to three years, India is expected to adopt a real estate investment trust structure that will provide a new group of buyers for completed developments.