BackL&T Finance, Motilal Oswal invest in residential projects
L&T Finance puts Rs200 crore into Total Environment project; Rajesh Lifespaces gets Rs130 crore from Motilal Oswal Real Estate
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Bengaluru: L &T Finance Holdings Ltd and Motilal Oswal Real Estate have invested Rs330 crore in two residential projects in Mumbai and Bengaluru, in separate transactions, which will be used to refinance the developers’ existing loans and for construction purposes.
L&T Finance has invested Rs200 crore in a project of Total Environment Building Systems Pvt. Ltd, a Bengaluru-based developer of premium homes. The debt transaction will help Total Environment partly refinance an earlier loan from non-banking financial company (NBFC), Indostar Capital Finance Ltd, which put in about Rs200 crore two years ago.
“Around Rs100 crore will be used to repay Indostar and the remaining Rs100 crore will be used for our JP Nagar project. We have kept our debt level in check, but we are bringing down the cost of debt, and replacing it with longer tenure capital. Going forward, we may raise fresh debt in the form of construction finance for our projects," said Kamal Sagar, chairman and managing director at Total Environment.
A second person directly familiar with the transaction confirmed this, saying that L&T Finance has committed the money and it will be disbursed in tranches.
Earlier this year, Total Environment raised Rs300 crore of equity capital from HDFC Capital Advisors Ltd for a bouquet of projects.
Real estate developers have been actively raising external funding to refinance existing loans, as project cash flows continue to be tepid and investors need to be given exits on schedule. In one of the largest refinancing deals in recent times, Mumbai-based Lodha Developers Pvt. Ltd raised Rs2,320 crore from Piramal Fund Management Pvt. Ltd, part of which was used to give HDFC Property Fund an exit.
In another transaction, Motilal Oswal Real Estate, the real estate investment arm of Motilal Oswal Private Equity Advisors Pvt. Ltd, has invested Rs130 crore in Mumbai-based realty developer Rajesh Lifespaces’ slum rehabilitation project in suburban Mulund. The money has been given from its new India Realty Excellence Fund III, which is currently being raised, and will be used to partly refinance an existing loan and for the project.
“This is our third transaction with Rajesh Lifespaces. We intend to finish raising this fund in another three months and once we have committed around 75% of the fund, by next September, we will be out to raise our fourth fund," said Sharad Mittal, director and head of real estate investment at Motilal Oswal Real Estate.
Last year, Rajesh Lifespaces raised Rs365 crore from ASK Group for its suburban Vikhroli project and Rs40 crore from Milestone Capital Advisors Ltd, in a deal where the latter bought apartments in bulk in the developer’s Raj Tattva project in Thane, near Mumbai. Earlier in 2016, the realty firm raised Rs100 crore from Altico Capital India Pvt. Ltd.
Pratik Patel, director of Rajesh Lifespaces, said the Mulund project is at an early stage and the capital will be used to refinance an earlier loan and to kick-start it.
“Refinancing will continue to be a predominant mode of giving exits to investors, till the time sales pick up and projects start generating cash flows," said Shashank Jain, partner, transaction services, PricewaterhouseCoopers India.
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