Mumbai: When India is witnessing highest level of private equity (PE) investments in real estate, PE funds are relying on hiring senior management with a lending background.
Maneesh Yadav, former business head of mortgages & commercial real estate at Aditya Birla Group, was promoted in October as the chief executive officer (CEO) of Aditya Birla Real Estate Fund by replacing Apurva Muthalia who moved to Chinese PE giant Fosun Group.
Maneesh, also worked as national credit head of mortgages and real estate funding Dhanlaxmi Bank Limited, has about 20 years of experience on the lending side.
Chinese conglomerate Fosun International is making an entry into the Indian real estate space and plans to invest close to $1 billion through a real estate private equity platform and bringing on board Apurva Muthalia, the CEO of Aditya Birla Real Estate Fund, to head this new arm in India, The Economic Times reported in September.
According to experts, the first-hand experience with developers is the key reason for hiring seniors from lending background.
“People from lending background know about developer’s historical and prospective financial condition, quality of financial and operating control, quality of capital structure & sustainability of earning and finally, quality of corporate governance,” said Ramesh Nair, chief operating officer at property advisory JLL India.
Vipul Roongta, who was promoted as managing director & chief executive officer at HDFC Capital Advisors Limited, the realty fund in March this year, had his stint at HSBC’s retail mortgage business before spending about 12 years at HDFC in various roles. HDFC Capital Advisors Limited, the investment manager for the fund, HDFC Capital Affordable Real Estate Fund-1 plans to raise with a total size of Rs5,000 crore for investment in affordable housing sector.
According to Cushman & Wakefield, the global real estate consultants, this year could record the highest Private Equity investments in real estate since 2008 which is estimated to be Rs43,600 crore.
Sunil Rohokale, former managing director & chief executive officer at lending major, ICICI Home Finance Co Ltd, currently serves as managing director & chief executive officer of real estate PE fund ASK Investment Managers Private Ltd. “The success rate of real estate PE fund headed by ex-lender of real estate is bound to be high. He understand demand-supply, knows the customers for project, how to identify the developer and analysing the balance sheet,” said Rohokale.
Similalrly, Sharad Mittal, head, real estate fund, Motilal Oswal Real Estate (MORE), is the former vice president, real estate investments at ICICI Prudential AMC Ltd.
“Real Estate Lending professionals at Banks as well as NBFCs do a lot of structured lending deals. In many of these deals, they compete with or take out investments made by RE Private Equity Funds. Hence, it is natural for good professionals to transition into Fund roles,” said Mukesh Bhasin, partner at domestic executive search firm Career Connect India.
Besides domestic funds, several global funds are active in filling their top deck with experienced hands with lending background. Last year, US-based PE fund Apollo Global Management hired Nipun Sahni, former business head for Real Estate Lending at GE Capital as partner and head of real estate, Apollo India.
Of the total expected private equity in real estate, over Rs24,500 is expected to be in the second half of the year, while the first half of 2016 recorded a total of Rs19,100 crore of PE investment. The period from January to June, saw an increase in PE investment by 64% to Rs19,137 crore as compared to Rs11,635 crore recorded in the same period of 2015. The total number of deals closed during H1 2016 increased 24% to 57 from 46 in the corresponding period of 2015, said the Cushman & Wakefield report, released in September.