Mumbai: Mumbai-based developer Wadhwa Group, which primarily caters to the luxury segment, is planning to raise around ₹ 500 crore through a mix of debt and equity to fund the first phase of its 450-acre township at Panvel, which it expects to launch by November this year.
This will also mark the company’s entry into the affordable housing segment. In the first phase of the project, the company plans to build around 2,500-3,000 units priced in the range of ₹ 21 lakh to ₹ 55 lakh, in the next three years.
“We need an additional sum of around Rs500 crore mostly for construction and to build infrastructure for the first phase of the project. We are looking for various avenues to raise this fund, including external commercial borrowings, masala bonds or even equity investment from some funds who want to invest in affordable housing," said Vijay Wadhwa, chairman, Wadhwa Group in an interview with Mint.
So far, the company has spent over ₹ 600 crore in acquiring land for the township. Last year, the company raised around ₹ 270 crore from Piramal Fund Management to fund acquisition of additional land for the project.
Wadhwa Group is also one of the companies selected by Piramal Fund Management under its recently launched ‘Piramal Preferred Partner’ programme. Under this plan, the Piramal group’s real estate investment provides pre-sanctioned loans to select developers to pursue acquisitions or execute projects.
However, Wadhwa said the company would prefer to tap the bond market or other cheaper funds through public sector lenders for the township rather than looking at more expensive funds from private equity firms.
“For affordable sector, we want cheap funds otherwise we would not be able to build affordable housing. Unless I bring everything at affordable rates, I can’t produce affordable houses. We would be looking at the cheapest available funds," Wadhwa said.
The first phase of the project would be built over 145 acres of land and would comprise of one-bedroom, two-bedroom and three-bedroom flats priced at ₹ 21 lakh, ₹ 35 lakh and ₹ 55 lakh, respectively. The company is also looking at bringing in other developers as strategic partners who would help construct and sell certain portions of the project.
At present, Wadhwa Group is developing around 10 housing projects spread across the Mumbai Metropolitan Region (MMR). Most of them cater to the mid to high income group.
In the last two years, big developers including Mahindra Lifespaces Ltd, Shapoorji Pallonji Real Estate and Tata Housing Development Co. Ltd have lined up low-cost housing projects across the country. Last year saw Shapoorji Pallonji launching its first affordable housing project under the Joyville brand in Kolkata, Tata Housing has planned around 3-4 projects under its budget housing brand, Tata Value Homes, which sells apartments at an entry price of ₹ 16 lakh.
According to real estate investors, private equity investors still do not see affordable housing projects (particularly houses priced below ₹ 25 lakh) as a lucrative segment to invest because of low margin and the risk of delay in delivering the project.
“Every market in India currently offers affordable housing opportunities though the definition of affordability differs from city to city. From the financing perspective, bank loans continue to be the cheapest form of fund available. So it makes sense to get funds from banks provided approvals are in place," said Neeraj Bansal, partner and head of real estate and construction practice, KPMG India, a consulting firm.
If a developer seeks funding from non-banking finance companies and private equities, they would take into account things like the nature of the project, the capability and the track record of the company and whether the land parcel is well-connected and has the right social infrastructure, Bansal added.