QIA is holding "conversations" with Kotak Realty Fund, run by Kotak Mahindra Bank, which would manage the investments on behalf of the fund, said the source, who asked not to be named because the deal has not been finalised.
Kotak would also make a small investment and plans to focus on residential property developments in major cities across Asia's third-largest economy for QIA, the source said.
Kotak declined to comment. QIA did not respond to emails or telephone calls.
Sovereign wealth funds and other long-term investors are eyeing opportunities in India's real estate sector, betting that
property prices are bottoming out after slumping this year on the back of the slowest economic growth in a decade.
House sales in major Indian cities, including Mumbai and Delhi, fell 22 per cent in the quarter ended September 30. House prices grew by 9 per cent over the same period compared with double digit increases in the year-ago quarter, according to property data firm Liases Foras.
Vikram Gandhi, founder of Delhi-based VSG Capital Advisers, which has been retained by Canada Pension Plan Investment Board (CPPIB) to seek investment opportunities in the country, said the timing to invest in Indian property was ideal.
"If you have a long-term perspective and you believe that the need for capital in a country is quite high, which it is, and the supply is limited right now because people are not investing, then this is the best time to invest," he said.
In November, CPPIB said it would invest $200 million dollars to buy leased, income-producing office buildings in a joint venture with Indian construction company, Shapoorji Pallonji Group, which will invest $50 million.
QIA's investment comes after the Abu Dhabi Investment Authority in July also appointed Kotak to invest $200 million in Indian real estate on its behalf, sources told Reuters at the time.
Also in July, Singapore's GIC Pte Ltd, Temasek Holdings Oman's State General Reserve Fund committed to investing a combined $200 million in a real estate fund run by Indian mortgage lender HDFC Ltd.
The investments are a shot in the arm for India's property developers, many of whom are burdened with debt that is expensive to service at steep interest rates.
Banks are also reluctant to lend because of fears of defaults, while private equity funds, which poured in billions of dollars at the height of the property market in 2007, have turned cautious after project delays impacted returns and exits.
Copyright: Thomson Reuters 2013