Bengaluru: Altico Capital India Pvt. Ltd, the non-banking financial company (NBFC) of Asia-focused investor Clearwater Capital Partners LLC, has invested Rs.300 crore in a residential township in Pune being developed by Pune-based Kumar Urban Development Pvt. Ltd.
The funds will be used to refinance the developer’s existing loans, allow current investors to exit the project and to fund construction.
The first phase of the 100-acre KUL Ecoloch township, a mid-segment project located at Hinjewadi in Pune, is being delivered, while the second and third phases are under construction.
This is Altico’s third deal in Pune since the beginning of this year. It earlier entered into a multi-project financing arrangement with Marvel Developers with an investment of Rs.240 crore. It also invested Rs.180 crore in the Pharande Group to part-refinance an existing loan and fund construction.
“Through this transaction, Altico Capital has further strengthened its presence in the Pune market. The overall exposure to this key market should cross Rs.1,000 crore soon, with our main focus remaining on providing capital to leading developers focused on mid-income and affordable residential projects in established locations,” said Altico chief executive Sanjay Grewal.
With the Altico funds coming in, lenders LIC Housing Finance Ltd and LICHFL Asset Management Co. Ltd will be able to exit the project while some of the money will be used for funding construction of the remaining phases.
Kumar Urban chairman Lalit Kumar Jain did not respond to phone calls.
Altico, which is also backed by Varde Partners Inc. and Abu Dhabi Investment Council, intends to deploy around Rs.3,000-4,000 crore in residential and commercial projects on an annual basis, depending on the right opportunities, Grewal said.
The Pune-based developer is also in talks to sell around 25 acres from a 100-acre township to Tata Realty and Infrastructure Ltd in a bid to monetize a portion, said a person familiar with the transaction, who did not wish to be named.
A Tata Realty spokesperson declined to comment.
“With on-ground projects still not picking up momentum in terms of sales, developers are compelled to resort to external funding sources to construct projects and for refinancing their existing debt,” said Shashank Jain, partner, transaction services, PricewaterhouseCoopers India.
Last year, Kumar Urban had raised Rs.280 crore from Xander Advisors India. The money was raised to partly refinance existing debt and partly for projects.
NBFCs, willing to refinance loans of real estate developers who cannot repay lenders from project cashflows, are easily the most aggressive lenders to real estate companies in the current scenario.
Asset management firms are setting up NBFCs to bridge the capital deficit in the real estate sector, Mint reported in a 13 September story. Real estate NBFCs have steadily become key capital providers to developers, particularly those who don’t have easy access to banks and large private equity (PE) funds.
“While it is a good thing that there is adequate liquidity in the real estate market today to support developers, but it is also important that the sector turns around soon so that project cashflows are adequate to address finance requirements,” Jain said.