Piramal and Ivanhoé Cambridge Announce Joint Residential Developments in India

Piramal Enterprises Limited has announced a strategic partnership with Ivanhoé Cambridge, a real estate subsidiary of CDPQ (Caisse de dépôt et placement du Québec), to provide long term equity capital to blue chip residential developers across the five major metro cities in India.

Ivanhoé Cambridge is allocating an initial US$250m for this purpose. PEL will commit an additional amount alongside and co-invest between 25% and 50% of each transaction.

There is a strong demand for equity in the capital stack as blue chip real estate developers increasingly prefer the option of partnering with investors in the early stages of the development life cycle over high cost financing.

Naturally, the capital will be made available to a selective list of Grade A developers who have already demonstrated a track record of execution capability, corporate governance and strong return potential. The investment focus shall include the Mumbai Metropolitan Region, Delhi (NCR), Bangalore, Pune and Chennai.

Ajay Piramal

Ajay Piramal, Chairman, Piramal Enterprises Limited said, "We are extremely pleased to be partnering with Ivanhoé Cambridge, a global institutional leader of great reputation with a long term value system and investing philosophy aligned with our own. Given the scale of our existing real estate offering and roster of existing developer relationships, the partnership will enable us to execute on very compelling opportunities to deliver high quality residential developments in the local markets that we service."

Khushru Jijina, Managing Director, Piramal Fund Management said, "This alliance with Ivanhoé Cambridge is consistent with our philosophy of acting as a perpetual provider of capital and underlines the confidence reposed by institutional investors time and again in our abilities as a fiduciary. We believe that the timing is opportune for the provision of both pure and preferred equity capital at an early stage in the project life cycle. Such equity funding with Tier 1 development partners will enable us to deploy capital over a longer time horizon and facilitate participation in larger projects with the ability to generate returns across real estate cycles."

Michael Sabia, President and Chief Executive Officer, CDPQ, said: "India represents a key market for our global growth.  We look forward to a long-term and fruitful business relationship with Piramal in the years to come."

Daniel Fournier, Chairman and Chief Executive Officer, Ivanhoé Cambridge said: "We are excited to participate in India's success story alongside one of India's leading fund manager. Piramal, with its long experience, impressive track record and strong relationship with India's top developers, will certainly play a key part in the success of this important investment. India's compelling demographic and economic fundamentals combined with supportive government policies bode well for a long-term residential development strategy such as this one." 

Five key Indian cities share 95 per cent of PE funds for Real Estate In 2015

The year gone by was proved to be good as for as capital market activities in real estate is concerned as key Indian metros had witnessed record inflow of private equity (PE) funds, says  Shobhit Agarwal,  Managing Director - Capital Markets, JLL India, who further adds, the total investment that the sector received in 1995 was approximately INR 19,500 crore.

Mumbai Metropolitan Region (MMR) received the maximum investment of 34% followed by Delhi-NCR at 29% and Chennai at 14%. Bangalore and Pune got 11% and 5%, respectively. Hyderabad witnessed 3% while all the remaining cities put together got 4% in PE investment.

The preference for these cities reflects learnings from past experience. While investors remain cautious about which cities to invest in, what is interesting to observe is that the ratio of structured equity and debt was more than half of the total investments received.

Even for plain equity investments, core commercial assets are preferred over other asset classes. This reflects how investors are cautiously optimistic about the potential for major gains in the Indian real estate. Equally important for them is to invest only in projects of credible developers having a good track record.

While the PE focus continued to remain high on residential and office projects, entity level investments and platform level deals came into the limelight indicating increase in investor confidence. A total of INR 6,048 crore worth of entity-level deals were witnessed but were limited to good developers / corporates only as investors relied on previous track record before putting their money to work.

In terms of asset focus, residential projects attracted considerable share of funding; however, equity investment in this space is still insignificant. On the contrary, income-yielding office projects attracted a majority of equity investments. While residential and office will continue to attract a majority of investments, retail is expected to start seeing better traction.

Going forward, investors are expected to remain focused on the top seven cities only. In the past few months, Chinese and Japanese investors have shown interest in bringing their long-term money into India. Overall, the stage is set for a superlative show this year. We won’t be surprised if 2016 shows a glimpse of investment activities that were seen in 2007, which was the previous peak and saw an investment of more than USD 8 billion.

MMR road development to cost Rs 100 crore; two highways to be expanded

To enhance the road network across Mumbai Metropolitan Region (MMR), precisely in Navi Mumbai area, more than Rs 100 crore will be spent to improve State Highway 40 and National Highway 4.

These two highways will be strengthened and widened at Palaspe phata, Shil Phata, Kalamboli junction, Takka Colony and Khanda Colony.

"A flyover having four lanes will also be built at Larsen & Toubro junction on state highway 40," says spokesperson of Mumbai Metropolitan Region Development Authority (MMRDA),Dilip Kawathkar.

Tender has been called for strengthening and widening national highway 4 in two phases, he said, adding, the first phase would include work between Takka colony and Palaspe phata. Whereas, in the second phase, road connecting Khanda Colony and Kalamboli junction will be taken up," said Kawathkar.

About Rs 54 crore would be spent for the 3.6 km long road work, he said.

Shil Phata-Mahape road on state highway 40 would be widened on a 6.9 km stretch for which Rs 56 crore will be spent, he further added.

Mira Road in MMR is all set for realty boom

The fast developing western suburb of Mira Road, part of Mumbai Metropolitan Region (MMR), is all set to become one of the most sought-after residential destinations considering good connectivity and affordability.

 "Today , the cost of homes in buildings with G+5 storey and without too many amenities is between Rs 4,000 and 4,500 psf. The cost of homes in tall buildings of about G+14 floors is between Rs 4,800 and 6,000 psf," says Samantak Das, National Head - Research of Knight Frank India.

Once deprived of basic facilities, including water supply and electricity , it now enjoys all the facilities including 24-hour electric power from Tata and Reliance, telecom facilities from MTNL, besides the private mobile network operators.

Says Surendra S Nayal, a real estate consultant in Mira Road, "Acute shortage of water made water tankers a common sight in the area. However, now the place has all the basic necessities. The development in Mira Road increased multifold when lots of municipal hospitals and schools started coming up here."

According to John, Mira Bhayandar Municipal Corporation (MBMC) has many development plans like setting up sewage treatment plant under JNNURM, two more fire stations , upgrading storm-water drain systems and increasing water supply .

Mira Road is a rapidly developing suburb. Shailesh Sanghvi, Director , Sanghvi Group of Companies and Secretary, MCHI Mira-Virar City says, "It enjoys all the facilities like telephone services, electricity supply and transport services . Also, BEST, State Transport (ST) and Thane Municipal Transport (TMT) buses stop at Mira Road."

Mira Road offers easy connectivity to all directions of the city - Mumbai, Thane and Navi Mumbai. The Mira-Bhayander belt enjoys easy accessibility from the western suburbs through the Western Express highway, and Thane through the Ghodbunder Road. Due to its proximity to Mumbai and better connectivity to Thane and Bhayandar , there has been a significant growth of population in this area.

The strong infrastructure development has provided the necessary impetus to the housing market growth. MMRDA has proposed fourlane roads connecting Gorai and Bhayandar and widening of existing roads. Mahim-Mira Road forms an important Fast Track Bus Corridor in the much-awaited Bus Rapid Transit System (BRTS). This system, once operational, would ease off pressure from the transportation considerably. MMRDA has also developed a skywalk near Mira Road railway station to offer more convenience to residents.

Fortunately, says Das, the construction of roads in Mira Road are good. "Even if there is any problem with the road especially during monsoon then it is immediately rectified by the MBMC. The construction of a flyover at Mira Road has just got over, which would help ease traffic," he adds.

Delay in housing projects haunts buyers in Metros, NCR worst hit

NEW DELHI: The latest report by PropEquity suggests massive execution delay of 45 per cent of all projects surveyed the three metros. 

One-third of the housing projects in Mumbai and Bangalore and over two-third in National Capital Region will be unable to complete work on time mainly due to a severe fund squeeze, according to the survey.

PropEquity, a real estate data, analytics, intelligence and research firm released a report on Friday on the Execution Delays of Residential Projects in the National Capital Region (NCR), Mumbai Metropolitan Region (MMR) and Bangalore Metropolitan Region (BMR).

In all, nearly 45% of the 1,920 projects launched in the three metros suffered due to scarcity of skilled workers and the slothful attitude of the developers, the research study by Gurgaon-based firm revealed. The study covered projects which were launched between January 2007 and June 2009 and were expected to be delivered by January 2012.

While thousands of investors who have booked apartments in these projects continue to pay their loan installments, developers in NCR reported the worst on-time performance, completing just 23% of the projects they had taken up. In Mumbai, developers had completed 61% of the projects and the number of ready projects was 66% in Bangalore.

“NCR has contributed to lot of that delay, and the major reason is that the number of projects that were launched here very large compared to MMR and BMR. The other reason is that the realty market picked up post subprime crisis and several projects were announced, but the developers did not have the execution bandwidth for it, and in several cases used funds raised from one project to acquire land banks,” Samir Jasuja, founder and chief executive officer at PropEquity said. 

The significant construction delays in the NCR region were primarily due to large-scale construction of residential projects in Gurgaon, Noida and Greater Noida. The execution timelines were further extended due to delays in obtaining regulatory sanctions in NCR, which was lagging behind MMR and BMR in timely delivery of both small and large sized projects.

Developers, however, said there are several other factors, ranging from getting approvals to the Mahatma Gandhi National Rural Employment Guarantee Scheme and infrastructure projects, which were competing for workers. Lalit Kumar Jain, who heads Confederation of Real Estate Developers' Association of India (CREDAI), the industry lobby group, said the Reserve Bank of India's decision to discourage banks and finance companies to lend to real estate companies had dried up domestic funding.

The significant construction delays in the NCR region were primarily due to large-scale construction of residential projects in Gurgaon, Noida and Greater Noida. The execution timelines were further extended due to delays in obtaining regulatory sanctions in NCR.

NCR was again lagging behind MMR and BMR in timely delivery of both small and large sized projects.

Of the delayed projects in the three regions, 40 per cent may be delivered by December end of 2012 as they are at the finishing stage and would be completed in the next few quarters. About 12 per cent of the delayed projects are expected to be delivered by 2014 end as they are most likely at excavation stage and would need around three years for completion.

Within BMR, 33 per cent of the affordable housing projects were delayed, followed by 31 per cent delay in the mid-end housing projects and luxury housing at 45 per cent. While in MMR, 37 per cent of the affordable housing projects were delayed, 36 per cent delay in the mid-end housing projects and luxury housing at 48 per cent.

The report further shows that small-sized projects (under 300 units) saw 62 per cent completion rates compared to just 23 per cent completion rate for large sized projects (above 300 units). Large-size projects are developed in phases, and realtors launch subsequent phases based on housing demands in that region.