Mumbai: Ajay Piramal-backed Piramal Fund Management has informed investors that it would be extending the tenure of its real estate investment fund--Indiareit Fund Scheme V--by a year as it has been finding it difficult to exit from some of the residential projects.
Launched in 2013, the fund has a tenure of six years which is extendable by another two years. With the primary tenure ending on 31 July, the company has sought extension until 31 August, 2020. So far the fund has made ten investments. Of the total, it has fully exited four projects and has partially exited one.
“This is a standard practise with respect to most close ended fund vehicles with a fixed tenure," said a spokesperson with Piramal Fund Management in an email response, adding that the Indiareit Fund V has shared the current status of residual investments with its investors as per standard corporate policy and as governed by market regulator SEBI.
“The Investment Advisor will continue to manage the residual investments towards their ultimate monetization during the remainder of the extended Fund term," the spokersperson added.
In a letter to its investors, the company has pointed out the six residential projects located in Mumbai, Bengaluru, Pune, and Gurugram from which it has been unable to exit. It has cited reasons ranging from delay in government approvals and land acquisition, to drop in land prices and slowdown in the real estate sector among others for the delay in completing those projects.
For instance, the fund said it was engaged with promoters of Ashiana Landcraft Realty – a joint venture between Ashiana Homes and Landcraft Group - to come up with a solution to completely exit the housing project in Gurugram. The fund invested ₹100 crore in the project in 2013. “However, it (the project) got delayed due to land acquisition issues faced by the government. Further, the Gurgaon market also witnessed compression of the land prices due to downturn in the market," the company said.
For Skylark Rida, a project by Skylark Group in Bengaluru, the fund has initiated developers to sell the land as the project is yet to take off due to liquidity issues. “Since Skylark is facing significant group-level liquidity issues, it was not able to raise construction finance for the commercial project," Piramal Fund Management said in the note.
The Piramal group firm said cash flow in a residential project in Pune, by local builder Darode Jog, was hit due to liquidity issues and inability to carry out sales and development activities. The fund invested ₹120 crore in 2015 in the Pune project. “We have been engaging with various developers in Pune to take over these projects for development and repayment of our investment." it said. It has also initiated Insolvency and Bankruptcy Code (IBC) proceeding against the builders which is at admission stage before National Company Law Tribunal (NCLT), Mumbai.