Dawnay Day International, the $10 billion UK-based investment company, is planning to invest $1.5 billion in the booming Indian real estate sector in the next two years.

To begin with, Dawnay Day has entered into a joint venture with a Bangalore-based family to develop a mixed property development including office and retail on 16 acres with an investment of Rs 400 crore.

Dawnay Day India Land, headed by M K Singh, will execute the project. This is Dawnay Day's first such JV with the landowner in real estate development.

G Naggar, chairman of Dawnay Day International, said, "Though realty prices are cooling down and interest rates are going up, Indian real estate space is very interesting. We want to actively develop properties by forming JVs with landowners, apart from outright purchase, consortium tendering/auctions. We will be part of India's development and growth and will invest in property and infrastructure projects across India's geography."

Unlike Europe where Dawnay Day is mostly into development of commercial space, the firm will focus on residential development in India, Naggar said.

Dawnay Day, since its inception in Germany three years ago, has property portfolio of $5 billion in 100 cities in the commercial property development. In New York, it recently bought 50 shops and 1200 apartments for $250 million.

"We like to invest mostly in commercial development. But, we want to focus on the enormous opportunity in the residential development equally in Tier-II and Tier-III cities. Finding the right partner and the right property is our priority," he said.

Dawnay Day is even exploring possibilities in warehousing, as the group sees a lot of potential in the sector in wake of burgeoning organised sector in the country.

"Retail is one of the fastest growing sectors here and we want to use that opportunity. We are actively considering to invest in the new warehousing facilities and retail development, including shopping malls," he said.

Dawnay Day is also bullish on contemporary Indian art and plans to set up an auction house for Indian art.

It has bought over 200 pieces and sees it as a good investment option. "Indian contemporary art is very good and has great artists. Price of Indian art pieces has gone up 25 times in the recent times. We are exploring the possibility of setting up an auction house for Indian art," Naggar said.

On the Indian real estate sector, Naggar said, "With rising interest rates and inflation on one side and rapidly developing Indian economy on the other, realty prices should soon stabilise. This cooling off and drop in the stock prices of realty firms provides an excellent opportunity for us to invest in realty projects, including integrated townships."

The UK-based companies has three subsidiaries in India -- financial services provider and advisory firm Dawnay Day AV India, Dawnay Day Hotels India and real estate development firm Dawnay Day India Land.

Dawnay Day Hotels India has plans to invest $200 million to build 10-15 hotels in the next three years. It has acquired properties in four cities -- Pune, Ahmedabad, Delhi and Jaipur -- and are close to finalising deals to buy properties in three other cities.