On Monday, Deutsche Bank's alternative investment management arm, RREEF launched its realty and infrastructure business in India with plans to invest over $1 billion in the next three years. Red Fort Capital, which runs a realty fund, has bought 1,300 acres in cities across India to build affordable housing. South Africa based Old Mutual's Triangle real estate fund is finding willing investors from the middleeast who want to park their money in the Indian real estate.

Says Kurt Roeloffs, managing director of Deutsche Asset Management, "Straight away, we can say that India is a place to invest in for the next ten years." Says Colin Young, head of property investments at Old Mutual, "The youthfulness, urbanization and changing shopping habits are going to bring a big change in organized retail which in turn in drive the demand for real estate."

So, given that there is shortage of space in metro cities and huge demand in tier II cities, will the new money lead to another bout of price increase? Says Roeloffs, "Big jumps won't be the norm but there will certainly be a floor on downward prices." Right now, the government policy stipulates that foreign direct investment through the automatic route can be made only on development of new property of sizes over 50,000 sq metres.

Further, overseas investors cannot buy an existing asset or premium retail assets on the high street, considered safe by investors. So, much of the overseas money come into more opportunistic areas like retail assets. Says Young, "The sector largely attracts largely risk capital from large investors who want to have this asset in their portfolio.''

Yet investors are attracted to invest in India, especially in new retail properties as the yield from such investments are considerably higher than elsewhere in the world. Typically, malls in India have a yield of 10-12% compared 5-6% in more matured markets.