KKR, GIC partner for India realty lending platform

Mumbai: Global private equity (PE) firm KKR and Co. on Thursday said it had established a non-banking financial company (NBFC) in India, along with GIC Pvt. Ltd, Singapore’s sovereign wealth fund.

The NBFC will provide structured credit solutions to the real estate sector in the country. This is KKR’s second NBFC in India.

Since 2009, KKR had extended more than $2 billion of structured financing to 21 business groups in India through its credit and capital markets business.

“The launch of the India-focused NBFC marks a milestone for our global real estate platform, and we are thrilled to bring long-term capital to India’s real estate sector,” said Ralph Rosenberg, global head of KKR’s real estate platform.

“We are excited to assist a sector that is still under-built. While many lenders provide debt to this sector, there is a need for solution-oriented, non-dilutive capital for property developers. We intend to fill that gap and contribute to the continued development of India’s residential and commercial real estate sectors.”

“This sector-focused NBFC further enables KKR to provide tailored financing solutions to companies, and adds to our established private equity and lending businesses in India,” said Sanjay Nayar, chief executive officer of KKR India.

“We aim to provide companies with value beyond capital alone in a way that is best suited to their needs. This real estate NBFC is our newest platform to achieve our goal in supporting good management teams to help their companies grow.”

During 2014, KKR initiated its real estate business in India by structuring and participating in three transactions with an aggregate amount of approximately $190 million.

In private equity, KKR has been active in India since 2006, with its total equity investments exceeding $1.5 billion.

Since launching a dedicated real estate platform in 2011, KKR has committed over $1.8 billion of equity to 29 real estate transactions in the US, Europe and Asia.

In June 2013, Ashish Khandelia joined as director for capital markets to work on KKR’s real estate investment platform in India, and the firm made its first investment last year when it invested ₹ 350 crore in Mumbai-based realtor Wadhwa Group’s luxury residential project called The Address—located in the central suburbs of Mumbai.

The lending unit is also in negotiations to invest ₹ 400 crore in Mumbai-based developer Omkar Realtors and Developers Pvt. Ltd for its luxury residential project located in Worli called 1973.

In an emailed response, KKR declined to comment.

Real estate private equity firms have been establishing their NBFCs over the last few years to lend to real estate developers.

In 2012, global investment firm Xander Inc. had hired Amar Merani to run its credit finance business called Xander Finance. In February last year, the Ajay Piramal-backed Piramal Enterprises Ltd (PEL) formed a joint venture with Canada Pension Plan Investment Board to launch its real estate lending company with an initial commitment of $250 million each. After the joint venture was formed, Piramal’s real estate fund Indiareit Fund Advisors Pvt. Ltd was merged with its real estate NBFC Piramal Finance under Piramal Fund Management Pvt. Ltd.

“Almost all the private equity funds have launched their lending business vertical as the returns in this business is better than what PE funds have made in India from their equity investments. These NBFCs are looking at returns between 17-21% depending upon the project’s location, status of completion and the developer pursuing the project,” said Shobhit Agarwal, managing director for capital markets at Jones Lang LaSalle India.