Starved by banks who are going slow on loans to realtors and slowing sales of apartments, smaller real estate developers in western India are wooing private equity investors to raise as much as Rs 1,000 crore to invest in their new projects.
Real estate developers such as Maharashtra-based Everest Developers, Puranik Builders, Sunjana Realtors and Omkar Realtors are planning to raise around Rs 300 crore each through private equity funds. “In March-April period, residential sales were down and cash flow of many developers has come down. Banks are also very cautious to lend to real estate players. Private equity players are showing interest since they will be able to get better deals,” Ravi Ahuja, director at Cushman and Wakefield, said.
Puranik Builders’ plans to raise around Rs 300 crore by this year to fund its upcoming projects. “We will invest around Rs 500 crore this year for five new residential projects. We already have a land bank of 100 acres and need funds for construction,” said Shailesh Puranik, managing director of Puranik Builders. The company has 10 ongoing residential projects in Thane, Mumbai, Lonavala and Nashik.
“Around 60 per cent of the funding will be done through PE while the rest 40 per cent will be done through debt,” said Puranik who is in discussions with real estate-focused funds. The exact stake that will be diluted in the special purpose vehicles used to construct the projects are in the process of being worked out.
Everest Developers, which is constructing two large townships in Thane, too now plans to raise around $60 million (Rs 268.10 crore) by September 2011 from PE investors, for constructing residential apartments.
“Every six months we construct two towers in the same outlay. We target to sell around 1,000 apartments every year. For the first time we plan to raise PE funds to bankroll this project,” said Nainesh K Shah, executive director at Everest Developers.
Sunjana Realtors plans to construct an integrated township for which it will invest around Rs 300-500 crore. “We have already acquired the land and are waiting for approvals for starting construction. We will raise funds for the construction through private equity but have not yet decided on the quantum. Once we get all the approvals we will decide on it,” said Sandeep Karnavat, director at Sunjana Realtors.
Omkar Developers that has already constructed nine projects on 2 million sq ft of land now plans to develop 12-15 million sq ft of land over the next three to four years. Deepak Mishra, head of sales and marketing at Omkar, said the company plans to offload minority stakes to private equity players for raising funds.
Bankers in charge of real estate lending at public sector banks such as State Bank of India, however, say that getting PE funds will be an uphill task since PE funds are wary of the high level of prices and falling property sale registrations in major markets.
Source: My Digital FC