Non-BSE listed realty firms get traction via PE route

Written by Mona Mehta | Mumbai | Updated: Jun 7 2009, 04:31am hrs
Builder
While qualified institutional placements (QIPs) are the preferred route of obtaining funds by cash-strapped BSE-listed real estate majors, the non-BSE listed developers of the Rs 10,000 crore real estate sector, who are not eligible for QIPs, are all set to raise funds through private equity (PE) route.

For instance, Pune-based non BSE listed Kumar Builders is all set to raise Rs 600 crore through the PE route which will aid launching of six township projects in Bangalore, Hyderabad and Pune, Lalit Kumar Jain, chairman, Kumar Builders told FE. Jain said, This quarter we are entering into joint development agreements with local landlords in Bangalore and Hyderabad and divesting 26% equity in special purpose vehicle (SPVs) for developing township projects in these cities. However four of the six projects are based in Pune and will be independently developed by us.

Hirco Plc's the alternate investment market (AIM) listed investment vehicle of Hiranandani group is all set to hold talks with its investors to seek approval for launching new township projects in Ahmedabad and Pune which have been on the anvil for awhile, Niranjan Hiranandani, chairman, Hirco told FE. According to him, We have got the mandatory from our investors, but in order to seek formal approval and raise funds for new township projects in Ahmedabad and Pune, we would soon be talking to our investors. The amount to be raised is yet to be finalised. However, company sources said that Hirco may raise close to Rs 1,500 to Rs 2,000 crore to commence new township projects during the second quarter of the financial year 2009-10.

With a slowdown in PE investments in real estate markets in India during the previous year, holding power of builders in certain real estate projects got reduced drastically during the financial year 2008-09. Niel Raheja, chairman, K Raheja group of companies said that non-listed real estate companies may face a similar trend even during this financial year.

According to Jitendra Jain, managing director and ceo of Mumbai-based Neev Group, The concept of joint development agreement is very much accepted and this is our major route of acquiring land. Such strategy puts both parties in a win-win position. Builders get to save on investment in land cost while landlords, being a partner in the project, get better value for their assets. Our Ivory Tower project which is coming up at Prabhadevi in Mumbai with an area of 2 lakh sq ft is being developed by this model.

Jain added that Neev Group has already tied up with landowners for residential township projects in Hyderabad, and are also in talks with several landlords in Chennai and Bangalore, in and around Mumbai and in Gujarat for joint development agreement. He clarified however that micro details will differ on the basis of projects, development concept, the capacity of the developer and the degree of contribution by the landlord.