ASK Property Investment Advisors, the real estate private equity (PE) arm of the ASK Group, on Monday announced an initial closure of its Rs 2,000 crore special situations domestic fund, which includes a green shoe option of Rs 1,000 crore. The company has already raised and will immediately deploy Rs 535 crore, whereas the remaining amount will be raised over the course of the next one year. “Currently the priority for a developer is to have access to flexible capital because he needs to execute even when in the next two years, there might be no visibility of good sales,” said Amit Bhagat, managing director and CEO of ASK Property Investment Advisors. “We are willing to extend equity funding and stay invested in the project until it sells, there will be on quarter on quarter obligation,” Bhagat added. Since its inception, ASK typically has financed project-level equity funding. Consciously it has stayed away from the in vogue, structured debt, the domain of a clutch of PE companies, crafted mainly to offer moratoriums. At times, the holiday is even up to two years before repayment obligations kick in.
The logic is to align repayment to actual cash flow generation from the projects. But now, it seems that lending, whether debt or equity, is falling in line with provisions under RERA, which do not allow companies to sell apartments at the launch stage, scuttling the age old practice of monetising a parcel of land before construction commenced. “The difference is in the underwriting,” said Bhagat. Structured debt might mean taking complete charge of the project in question and additional corporate guarantee as collateral whereas in our case, there is no pre-determined return, no additional security, the project has to make money, Bhagat added. Clearly, it seems unlikely that distressed projects will be able to attract such capital, rather it will be limited to pedigree companies that have good execution record.
The deployment will be spread across several projects. On an average, ticket size of investments under this fund will be Rs 200 crore a piece, bulk of it in affordable to mid income segment. “Within Mumbai, we will target projects with price tags upto Rs 2 crore and outside of it, between Rs 50 lakh and Rs 1 crore,” Bhagat clarified. A report released by Knight Frank India in July said, the category of housing valued at less than Rs 50 lakh is now as much as 70% of the total housing stock across the top eight cities of the country, substantially higher than its share of 52% last year, signaling a major shift towards more affordable products in general. ASK remains among a handful of funds, which have successfully closed fund raising in the past couple of years. “It is tough for funds that have no track record to raise new corpuses but for credible players, there is always a market,” Bhagat said. The company has existing partnerships with Godrej Properties, ATS Builders, Puravankara Projects, Shriram Properties among others.