Bangalore: Red Fort Capital Advisors Pvt. Ltd, a private equity (PE) firm that funds real estate projects, has invested Rs 250 crore in a slum redevelopment project of Mumbai-based developer Omkar Realtors and Developers Pvt. Ltd.
The project in Mumbai’s Malad suburb will have four residential towers and a small office space to be developed at a later stage.
Red Fort Capital has thus far confined its investments to the National Capital Region (NCR) property market. Recent major investments include projects of Ansal Properties and Infrastructure Ltd and Parsvnath Developers Ltd in Delhi.
This is Omkar’s second round of PE funding, having raised Rs 200 crore from Ajay Piramal-backed Indiareit Fund Advisors Pvt. Ltd in September for its luxury residential project in Mumbai.
With banks tightening lending norms, PE firms and non-banking financial companies (NBFCs) have emerged as an important source of funding for most real estate companies.
“We have been working on this deal with Omkar for a while and we think they are well poised to leverage slum rehabilitation opportunities in Mumbai,” said Subhash Bedi, managing director, Red Fort Capital. “We look forward to significantly more investments in Mumbai and are opening an office in the city.”
Omkar has emerged as one of the largest participants in slum redevelopment in Mumbai in recent years, according to property analysts. Such projects involve companies relocating slumdwellers to new housing units and developing and selling the freed-up space at market prices.
“We plan to raise funds only at project level, because our projects are large. We don’t want to dilute stake at enterprise level,” said Babulal Varma, managing director, Omkar Realtors.
This year there have been 25 PE transactions in real estate at an estimated value of $810.93 million (around Rs 4,100 crore), according to VCCEdge, which tracks PE investments. In 2010, PE funds invested about $1,096.13 million in real estate across 35 transactions.
“It has been difficult for PE funds to deploy money in the recent past as developers have been holding on to prices and higher valuations, but going forward, we will see more deals happening at a better 20-30% internal rate of return,” said Ambar Maheshwari, managing director, corporate finance, Jones Lang LaSalle, a property advisory.