Piramal Finance to invest Rs3,000 crore in affordable housing projects

Bengaluru: Piramal Finance Ltd, a unit of Piramal Enterprises Ltd, said it will focus on investments in affordable and mid-income housing projects across major cities with an initial investment pipeline of Rs3,000 crore.

The company said it has set up a dedicated team for this purpose.

Piramal intends to scale it up and invest around $2 billion in such projects by 2020.

It will offer both pure and preferred equity capital to top developers who are looking to buy or develop land and need early-stage growth capital. It may also pursue an opportunistic acquisition of land on its own and invite developers to participate on a joint development basis.

Khushru Jijina, managing director of Piramal Finance and Piramal Housing Finance Ltd, said that for certain projects that fit the bill, it may tap into its investment partnership with Ivanhoé Cambridge, a real estate subsidiary of Caisse de dépôt et placement du Québec (CDPQ), Canada’s second largest pension fund.

Last year, Piramal Enterprises entered into a strategic partnership with Ivanhoe Cambridge to provide equity capital to residential developers, wherein the latter will allocate an initial $250 million and Piramal will co-invest between 25% and 50% of what the former puts into each transaction. The total investment is set to scale up to $340 million between the partners.

For affordable housing projects, through its proprietary wholesale loan book, Piramal Finance will sanction milestone-linked construction finance for projects so that developers are able to achieve financial closure for the projects at the very outset.

In the new RERA regime, this is a unique advantage as it enables the developer to unilaterally focus on executing the project without worrying about financing, the firm said.

Domestic investors in the residential segment are clearly looking to tap into the affordable housing space when developers are realigning business strategies to build budget homes that people will buy.

Last week, Bengaluru-based Prestige Estates Projects Ltd said it will create an affordable housing platform with HDFC Capital Advisors Ltd, a subsidiary of Housing Development Finance Corp. Ltd, to jointly invest Rs2,500 crore in low- and mid-income housing projects.

In October, Mahindra Lifespace Developers Ltd, the real estate arm of Mahindra Group, also partnered with HDFC Capital to jointly invest Rs500 crore over the next three years to develop affordable housing projects.

“While many players in the market are focused on providing equity or debt capital towards affordable and mid income housing, we believe that our ability to provide a comprehensive end-to-end solution—including both early stage equity as well as construction linked debt—is unparalleled as it helps the developer achieve financial closure for the project on day zero,” said Jijina.

In line with the government’s aim to provide housing for all by 2022, the Union budget on 1 February proposed to set up an affordable housing fund under the National Housing Bank (NHB).

The 2017 budget had proposed assigning infrastructure status to affordable housing projects and facilitate higher investments.

Jijina said Piramal’s new housing finance company will play a major role in the affordable housing space by lending to both self-employed individuals and salaried professionals, other than investing directly in projects through Piramal Finance.

“All good developers are talking about affordable housing today. They have learnt to control costs and are looking at higher volumes and quick sales through such projects and that’s an opportunity for us,” he said.