Puravankara in talks to set up two investment platforms

Mumbai: Bengaluru-based real estate firm Puravankara Ltd is in talks with institutional investors to form two separate investment platforms totalling upto Rs4,000 crore to fund its future expansion plans, said senior executives of the company.

The BSE-listed firm would be using the two funds to finance its new pipeline of affordable housing projects and also to build a sizeable commercial rental portfolio within the next five years.

In an interview with Mint, Ashish Puravankara, managing director, Puravankara Ltd, said the company is planning to build around 8 million sq ft of commercial office space in the next five years across Bengaluru, Chennai, Hyderabad, Pune and Mumbai. Unlike in the past, it would adopt a build and lease model rather than outright sale, he said.

“We have focussed only on residential. We want to diversify our portfolio in terms of our product mix. We have almost completed building around 2.5 million sq ft of commercial office space. Another 5 million are in design stage,” he said.

According to Kuldeep Chawla, chief financial officer, Puravankara Ltd, the possibility of listing on Real Estate Investment Trust (REITs) has made foraying into the commerical real estate much more attractive.

“The biggest risk of commercial real estate (business) is exit. The exit risk on the commercial portfolio has come down significantly with REIT,” he said.

Besides, the company has also lined up to launch around 15 million sq ft of residential space across various projects in the next one year. Of the total, 10 million sq ft are in affordable housing space with prices ranging between Rs25 lakh to Rs50 lakh per apartment. Its luxury and affordable houses are built under Puravankara and Provident brand, respectively.

To fund these expansion plans, the company is planning to create investment platforms with few institutional investors. “We are fairly in advanced stage of discussion with couple of institutional investors to put together platforms for affordable housing as well as commercial,” Chawla said.

The two funds ranging between Rs2,000 crore and Rs4,000 crore would be set up within the next two quarters, he said. This is the first time, Puravankara is looking for such a deal though it has a joint venture with Keppel Investment Mauritius Pvt Ltd, subsidiary of Singapore-based Keppel Land Ltd, a firm owned by Temasek Holdings.

“We want to diversify our base of investors. We think there is a huge opportunity and we have got limited resources,” Chawla said, adding the company could either enter into partnerships with a consortium of institutional investors or with single firm.

The last two-three years have seen several top developers and investors entering long term platforms with an aim to invest together in several projects rather than creating single project level funds.

In October last year, global insurance firm Allianz Group and Shapoorji Pallonji Group (SP group) set up a $500 million real estate fund—SPREF II— to invest in commercial office properties in India. The same month, Mahindra Lifespace Developers also created joint venture with HDFC Capital to develop affordable housing projects with an investment of Rs500 crore in the next three years.

SP Group also has tie up with the with Standard Chartered Private Equity, International Finance Corporation (IFC) and the Asian Development Bank (ADB) in invest jointly in affordable housing projects.

“Platform deals are a win-win for both investors and developers. It’s a long term play rather a opportunistic project by project partnerships. Such partnerships are formed wherever there is a need for long term capital across different asset classes. It brings greater transparency and trust between the investors and developers,” said Shashank Jain, partner, transaction services, PwC, a research and consulting firm.livemint