Bengaluru: Piramal Finance Ltd has sanctioned a Rs400 crore loan to Gurugram-based Advance India Projects Ltd (AIPL), primarily for construction finance.
AIPL has five projects under construction including AIPL Joy Central, a four-acre, mixed-use development in Gurugram comprising commercial and retail development along with a multiplex.
In the National Capital Region, where the residential market has seen a prolonged slump, investors are keen to put their money in under-construction office projects, which are performing better than home sales.
Piramal Finance, one of the largest lenders and investors in real estate, started funding office projects in early 2016 on the back of a steady growth in the commercial office segment when a prolonged slump in residential sales continued. It has deployed and sanctioned around Rs5,000 crore in office projects as of end-October.
“This transaction is representative of our intention to partner with strong developers in the commercial space and lending on a flexible structure to meet the requirements of the project and the market. I am pleased to have strengthened our relationship with the AIPL Group,” said Khushru Jijina, managing director, Piramal Finance Ltd.
Piramal had extended a Rs120 crore loan to AIPL in December 2016 against AIPL Business Club, an information technology (IT) office project in Sector 62, Gurugram.
This is the only transaction, so far, which Piramal has closed from its $500 million real estate debt financing platform with Canadian Pension Plan Investment Board (CPPIB) that was announced in February, 2014.
In another transaction, Piramal had also invested Rs140 crore in AIPL Peaceful Homes, a residential project in Sector 70-A Gurugram, which has been entirely repaid.
“…We applaud them on their ability to deeply customize their transactions and add tremendous value through the funding process,” said Daljeet Singh, managing director, Advance India Projects Ltd.
In November 2016, Piramal said it will also finance completed commercial projects, including office and retail assets, through a flexible lease rental discounting (LRD) model, as part of its strategy to diversify into commercial realty.
The LRD model of financing is a slightly longer-term funding, where the project becomes rent generating and developers repay from those lease rentals.
Delhi-NCR continued to lead in leasing volume in the first half of 2017, followed by Bengaluru, said an August note by property advisory JLL India. The first half of 2017 has seen take-up reach just under 10 million sq. ft across the four major cities (NCR, Bengaluru, Mumbai, Chennai), slightly less than H1 2016 when the take-up exceeded 10 million sq. ft.
“Institutional investors want to invest in developmental office assets partly because of demand for space and also, if they are confident about a developer’s credentials,” said Rajeev Bairathi, executive director and head of capital markets at property advisory Knight Frank India.