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Bengaluru: Piramal Fund Management Pvt. Ltd plans to provide an open line of credit to some of the country’s top realty firms to enable them to buy land and acquire projects.

In a unique investment strategy, Piramal Fund has decided to pre-sanction a 15,000 crore funding limit to back about 8-10 developers in Mumbai, Bengaluru, National Capital Region, Pune and Chennai through a new scheme called Piramal Preferred Partners.

Under the scheme, Piramal Fund will enter into investment partnerships with a few chosen property firms, some of its existing partners and a few new ones, and commit about $250-300 million to each of them,which it will disburse as and when the developer brings a deal to the table.

Piramal Fund Management is fast emerging as one of the largest and most aggressive real estate investors, with loan book and equity investments worth 22,000 crore in the residential space alone.

It will also deploy 5,000 crore in commercial office projects in key property markets in the coming financial year, Mint had reported on 15 February.

“We were already prevalent across the entire capital stack and able to act as a perpetual provider of capital for multiple projects. By offering this facility, our development partners will always be able to demonstrate a competitive advantage as against their peer group," said Khushru Jijina, the managing director of Piramal Fund Management.

Piramal Fund Management’s new investment scheme comes at a time when there has been a fair amount of consolidation in the sector, in the course of a two-year-old slowdown, where larger developer brands have done better than their mid-sized counterparts. They have better access to capital and the ability to raise money at relatively cheaper rates.

This is the bunch that Piramal Fund wants to build stronger relationships with.

The investment arm of the Piramal Group already provides the entire capital stack—pure equity, debt and structured debt, construction finance and bulk buying of apartments.

Through the new scheme, too, it will provide different kinds of capital depending on the acquisition opportunity and the stage of funding. A developer can get equity capital to buy a certain piece of land at a slightly higher interest rate, construction finance at a cheaper rate and then bring down the cost of funding by converting the equity to structured debt once the project launches and cash flows start coming in.

To be sure, investor-developer partnerships to build investment platforms aren’t entirely new, and there has been a few of them in the last couple of years.

However, Piramal’s funding ability and scale is much bigger, making it an ambitious strategy to be able to hook the best-placed developers who are doing well operationally and have steady cash flows from projects, making the investment profile far more secure in a slow real estate market.

“Platform deals between developers and investors are entirely opportunistic where you have the line of credit and then put out the money when you jointly like a deal," said Chintan Patel, partner (deal advisory- real estate, hospitality) at KPMG India, a consulting firm.

GoldmanSachs Group Inc. has partnered Nitesh Estates Ltd to jointly invest up to $250 million in profitable commercial real estate assets; sovereign wealth fund Government of Singapore Investment Corp. Pte Ltd (GIC) has entered into a 1,500 crore joint venture agreement with Brigade Enterprises Ltd to invest in projects in South India; and Standard Chartered Private Equity Ltd and Tata Realty and Infrastructure Ltd have partnered to invest 2,600 crore in new development opportunities to build office space.

By making capital available at an earlier stage, Piramal Fund intends to give developers the luxury of planning acquisitions without worrying about funding. The limit itself would also be reset on a periodic basis.

“Of course, we will be very selective about who we choose as our partners but we think this is a good time, because strong realty developers have become stronger and need capital to grow faster," said Piramal’s Jijina.

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