Bangalore: Private equity (PE) fund ASK Property Investment Advisors Pvt. Ltd has invested Rs.100 crore in Shriram Properties Ltd, after investing a similar amount in a Bangalore project of Mantri Developers Pvt. Ltd last week.
Shriram Properties raised the money to pay for the land it recently bought—16 acres near Sarjapur Road in Bangalore and 20 acres in Hyderabad’s Shamirpet area.
Bangalore-based Shriram Properties, part of the Rs.25,000 crore Shriram Group, is also in an advanced stage of raising another Rs.350 crore from two other PE funds, said managing director M. Murali.
“The money will be used to buy more land in southern cities only,” he said.
ASK Property manages domestic real estate funds of more than Rs.1,300 crore and the latest investment is from the Rs.1,000 crore it raised for the ASK Real Estate Special Opportunities Fund this year.
Shriram Properties has closed multiple PE deals in the past, including a $100 million (around Rs.540 crore today) investment from PE firm TPG Capital, one of the largest such deals in India’s real estate sector last year.
The developer, which has nearly 1,000 acres of land, has raised about Rs.1,000 crore of PE investments for its various projects. It also has around 7 million sq. ft of projects under development and more large projects in the pipeline. Property analysts said PE funds are taking a mixed approach towards investing in real estate projects.
Some funds are opting for projects at advanced stages of construction or partly-finished projects in need of capital, and a few funds are investing in relatively risk-prone greenfield projects yet to commence.
“Even when funds are investing in projects where construction hasn’t begun, they would make sure that the turnaround time of the project would be quick so that the monies start coming in,” said Ambar Maheshwari, managing director (corporate finance) at Jones Lang LaSalle, a property consultant. Maheshwari said non-banking financial institutions and funds that lend to builders ask for substantial collateral and prefer projects at advanced stages of construction.
In the ASK-Shriram Properties transaction, the execution capability and the background of the developer was one of the deciding factors, besides the location of the project and the quality of the land parcel, said Sunil Rohokale, group chief executive of ASK Group.
“Risk mitigation for a deal like this would be a combination of all these factors along with our own focus on the specific size of projects and price of apartments that we choose to invest in,” said Rohokale. ASK Property’s investments are typically drawn towards residential projects that are of 400,000-500,000 sq. ft with apartments of 2,000-3,000 sq. ft priced at Rs.2-3 crore each. The deal is the fourth from its new fund, the previous investments being in Mumbai with Rajesh Builders and Godrej Properties Ltd, and the recent one in Mantri Developers’ Bangalore project.