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These funders have either established direct affiliations with lenders located in India or partnered with these Indian companies. Others developed exclusive arrangements with U.S. companies that had established relationships with Indian entities, or they became U.S.-based fund managers with backing from global financial institutions. They facilitate commercial real estate funding in the Asia Pacific region, and they work directly with Indian developers and lending institutions.
These funding sources have a presence in India with a company that is owned, operated and staffed by Indian nationals. These individuals have a tremendous depth of understanding and experience with every aspect of the country’s commercial real estate industry.
These arrangements are important to U.S. brokers wishing to take advantage of the Indian market for numerous reasons. First, it helps overcome language and cultural barriers and facilitates familiarity and rapport. Second, these companies and their representatives are well-versed in the terminology and legal and governmental requirements and standards of their country. Third, they typically are willing and available to consult with clients in person when necessary. Lastly, they have established track records for successful completion of large-scale projects.
Commercial mortgage brokers can work with these funding sources more easily than what is required when funding transactions in the U.S. The numerous logistical difficulties actually simplify brokers’ responsibilities when working through one of these funding sources.
The broker’s main responsibility is to provide fundamental information about the project and the borrower through a questionnaire that is typically about two pages. This information allows the funding source to identify specific investors for that project. The basic premise is that the transaction will be funded if the information checks out and there are no unexpected surprises, such as the discovery of hazardous-waste deposits or other issues that should have been uncovered previously.
After identifying an investor for the project, the broker is presented with rates, terms, any fees required and a description of the due diligence. The broker forwards this information to the borrower for review. A conference call with the funding source, the broker and the borrower is often conducted at this point to answer questions and explain details.
When the borrower accepts the proposal, the communications responsibilities are transferred from the commercial broker to the lender’s underwriter, who maintains direct contact with the borrower for the remainder of the process.
Underwriters coordinate between their U.S.-based companies and the Indian company that is performing the on-site activities. At this point, the U.S. commercial mortgage broker receives periodic updates from the underwriter and is free to pursue additional business.
Despite the minimal amount of work these transactions require, the brokers’ fees typically remain the same as those for a domestic transaction. Brokers should always secure direct fee agreements with their clients. Based on the complexity and magnitude of the task of securing funding for projects in distant locations, fees of 1 percent to 2 percent are common.
Taking advantage of this process and the strength of the Indian market can lead to financial success for any commercial mortgage broker who gets involved. Finding these companies may be the most difficult part of the equation. They are not interested in receiving mass submissions; rather, they remain selective about the projects they represent. This is necessary to maintain their credibility, reliability and dependability in the eyes of their partners and affiliates overseas.
Locating potential clients and projects can be as simple as business networking with professionals who have business contacts in India or know someone who does. These clients do not necessarily have to reside in the U.S. because clients residing in India are welcomed and often preferred. Some investors view them as better potential prospects because they will already be familiar with the Indian companies that contact them and may know about past projects by these companies.
Despite the economic downturn and the decline of financial markets, there are still ways to turn these negative world events into positive and profitable advantages that can lead to a prosperous 2011.
Milton Franklin is president and CEO of
Nationwide Business Consultants of South Florida Inc., which maintains direct relationships with active, nontraditional domestic and international funding sources and investment-banking firms. Nationwide offers a range of creative financing products and services to commercial clients, as well as partnering opportunities for commercial mortgage brokers and project funders. A graduate of Wharton Business School, Franklin has 26 years’ financial-services experience. Reach him at (786) 506-3578 or email@example.com.
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