Indiabulls
Real Estate Ltd (IBREL) is gearing up to launch a number of projects in Mumbai
and the National Capital Region (NCR) after holding back launches last year due
to tepid market conditions, chairman Sameer Gehlaut said in a note after the
annual general meeting (AGM) on Thursday.
The company
will focus on project execution and keeping debt levels and costs under
control.
This year,
the Mumbai-based developer plans to launch three projects in Gurgaon, one in
Thane and another in Alibaug, both near Mumbai. The projects are a mix of
commercial office space and high-end residential development.
Of the
projects, the seven-acre Thane property was bought by IBREL last year for about Rs.236 crore. The firm plans to build premium residences on
it. With a development potential of 1.07 million sq. ft, the project has a
sales potential of around Rs.1,600 crore, Gehlaut said.
In June,
Gehlaut, co-founder of the Indiabulls Group, said he would invest Rs.538 crore in IBREL, raising his stake in the company to 37%
from 27%, a year after the three founders of the group separated their
businesses. The money was for speeding up project execution without taking on
additional debt.
The company
plans to hand over 6,000 apartments this year and about 15,000 homes in the
next four years.
IBREL, which
has about Rs.5,461 crore of debt as of June, plans to reduce it by about Rs.600 crore in the current fiscal year.
Indiabulls
Asset Management Co. Ltd has launched its second fund, aiming to raise up to Rs.1,000 crore from domestic investors to invest in
residential projects in key property markets.
Indiabulls
High Yield Fund, the second real estate-focused fund from Indiabulls Asset
Management, plans to raise Rs.500 crore along with a greenshoe option of raising an
additional Rs.500 crore over the next six months, and deploy the capital
in less than a year’s time.
The new fund
has got a sponsor commitment of Rs.50 crore from Indiabulls Housing Finance Ltd.
Indiabulls
Asset Management is a unit of Indiabulls Housing Finance.
Unlike the
first fund, which offered debt to developers, Indiabulls High Yield Fund is a
structured debt fund that incorporates an equity kicker as well. The new fund
includes a fixed internal rate of return (IRR) of 16-17% along with an equity
upside, where the latter will be higher in case of sales price increase or
higher sales in a project. Combining the two, the fund aims to achieve a
cumulative IRR of 23-24%.
“Apart from
Mumbai and NCR (National Capital Region centred around Delhi), we will also
evaluate deals in Hyderabad, Chennai and Pune and invest in projects that are
either under construction or slightly more early stage, where approvals are
already procured,” said Ambar Maheshwari, chief executive-private equity,
Indiabulls Asset Management.
With most
real estate-focused private equity funds offering pure debt today, there is a
tremendous amount of downward pressure on lending rates. This is pushing some
funds to either incorporate some amount of equity or lean towards a more
structured arrangement, which involves a bit more risk but also ensure better
returns.
Indiabulls
ventured into the real estate private equity business in February last year,
when it launched its Indiabulls Real Estate Fund, a Rs.500 crore pure-debt fund, with a Rs.100 crore greenshoe option.
So far it has
invested in four transactions—Rs.125 crore each in Shree Naman Group and Sheth Creators Pvt.
Ltd’s projects in Mumbai, and Rs.100 crore each in Supertech Ltd and Vatika Group projects
in NCR. The fund is in the process of closing its last deal, a Rs.120 crore investment in a residential project in southern
India.
“Deployment
of capital is a massive challenge when a sector faces a slowdown. As a fund
manager, we take a top-down approach, where we first look at the quality of the
developer, followed by the scale and size of the firm and then evaluate the
location and project specifics. Due diligence takes longer than usual in such a
scenario, and we have been particular about staying away from both ultra-luxury
and low-cost housing projects,” said Akshay Gupta, group executive head and
chief executive officer, Indiabulls Asset Management.
This year is
turning out to be quite critical for real estate fund-raising, with many
private equity funds on their way to raising more than $4 billion from overseas
investors for real estate projects, according to Mint research.
“Fund-raising
scenario remains similar as last year, and continues to be fairly tough. Both
overseas limited partners and domestic HNIs (high net-worth individuals) now
give significant importance to the quality and past performance of the fund
manager,” said Shashank Jain, partner, transaction services,
PricewaterhouseCoopers India.
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