Piramal funds BKC project, plans second redevelopment fund
Benguluru: Piramal Fund Management Pvt. Ltd has invested Rs.125 crore in a slum redevelopment project in Mumbai’s Bandra-Kurla Complex (BKC) area from its Mumbai Redevelopment Fund, a top fund official said. Separately, the Piramal Group company also bought Rs.75 crore of inventory in a bulk purchase in the same project from its Apartment Fund. Both funds are of Rs.500 crore each.
The project, known as BKC One, is a joint development between Kolkata-based Forum Group and Mumbai’s Omkar Realtors and Developers Pvt. Ltd. Piramal has put in capital for project expenses and land acquisition for the first phase called Serendipity, the next phase, and acquisition of development rights for adjoining slums. While Forum will construct and is in charge of sales and marketing, Omkar Realtors is taking care of the slum clearance and rehabilitation part.
“With this transaction, we have fully deployed the Rs.500 crore Mumbai Redevelopment Fund,” said Khushru Jijina, managing director of Piramal Fund Management.
From the fund, which was raised in mid-October 2013 and has invested in slum redevelopment projects, Piramal has done four transactions. Three of these are with Omkar Realtors, with which Piramal has done multiple deals before, either as an independent or joint development partner.
Jijina said there is demand for capital to back redevelopment projects in a land-starved city like Mumbai. “Slum redevelopment is critical in a city like Mumbai and if people like us give serious capital, we assume that more good developers will also come in,” he said.
In the next couple of months, Piramal is planning to launch a second series called Mumbai Redevelopment Fund II, which will have a similar Rs.500 crore corpus, but will invest in both slum redevelopment and society redevelopment projects.
Piramal raised the Rs.500 crore Apartment Fund in 2014 to buy apartments from real estate developers at significant discounts to market rates. Its first investment was in Omkar’s Alta Monte project in suburban Mumbai. Now, it has bought Rs.75 crore inventory before the official launch of the BKC project, and has already sold a chunk of that through word of mouth. Construction is on and the apartments are priced at Rs.7-8 crore each.
“We have sold nearly 25% in the first phase and it’s encouraging in a market which is fairly new to us. Piramal’s funding in various forms gives them the comfort of control and helps us get the project funded seamlessly,” said Rahul Saraf, managing director of Forum Group.
With Piramal’s bulk-buying deal, we are not really in a hurry to launch the project now, Saraf said.
Slum redevelopment projects are considered to be challenging due to the lengthy approval and slum-clearance process, but are also very lucrative. “Slum projects could face delays and are risky because the developer needs to put in capital before project approvals or consent (of slum dwellers). So, the profits are commensurate with the risks involved. If there is institutional capital available somewhere along this process, it helps the developer de-risk to a great extent,” said Anuj Nangpal, managing director of DTZ India, a property advisory.