Omkar-L&T Realty project gets funding from Indostar Capital2 min read . Updated: 09 Jun 2013, 08:04 PM IST
Redevelopment project called Crescent Bay, is a joint venture between the two firms and was launched recently
Bangalore: A premium residential project of Omkar Realtors and Developers Pvt. Ltd and L&T Realty Ltd has received 300 crore in funding from Indostar Capital Finance Pvt. Ltd, a non-banking financial company, said two people familiar with the development.
The 17-acre, redevelopment project in central Mumbai’s Parel area, called Crescent Bay, is a joint venture between the two firms and was launched recently. It has two-, three- and four-bedroom apartments.
“This is a debt deal in the form of NCDs (non-convertible debentures)," Gaurav Gupta, director, Omkar Realtors, said in an emailed response.
A spokesperson of Indostar Capital declined to comment.
NBFCs are fast gaining leverage as lenders of choice in the real estate sector, and typically offer debt finance to developers.
Like private equity (PE) funds, NBFCs have become a critical part of the funding network in real estate, and are closely competing with the former, which are also doing similarly structured debt deals these days.
While banks lend to real estate firms at interest rates of 13-14%, NBFCs charge 21-22% and PE firms seek returns of 25-28%.
Indostar Capital offers loans against residential and office space projects. It also lends for acquisitions and buyouts as well as secured corporate lending for capital expenditure or working capital.
Mumbai-based Omkar Realtors specializes in redevelopment projects and has raised substantial capital from PE firms such as Indiareit Fund Advisors Ltd and Red Fort Capital Advisors Ltd in the past for their projects.
L&T Realty is developing both residential and office space projects in Mumbai, Chandigarh and Chennai.
“The Parel project has sold quite some stock through pre-sales and so, the receivables are healthy. That should make it comfortable for the developers to service the loan," said one of the two people mentioned above, who didn’t want to be identified.
Analysts said large and mid-size developers are looking to raise money to pare debt, buy land or finance the construction of their projects by selling NCDs to wealthy individuals and institutions.
Many NBFCs are also offering relatively larger loans now, compared to the standard 50-100 crore loan sizes prevalent even a year ago. This is relevant during a time when PE funds are cutting deal sizes and adopting debt-structured deals similar to NBFCs.
“While NBFC lending will continue to remain robust this year, how much they lend would depend on their capitalization (of NBFCs). With a number of NBFCs wanting bank licences, their individual book sizes have become very large," said Ambar Maheshwari, managing director, corporate finance, at property advisory Jones Lang LaSalle India.