Piramal Realty puts off plans to float PE fund for commercial real estate

It had planned to acquire brownfield and greenfield commercial properties and later sell them to other private equity funds

Piramal Realty, the real estate development arm of Ajay Piramal-led Piramal group, has put off plans to float a private equity (PE) fund for commercial real estate due to volatile market conditions, said a source.

Piramal Realty had planned to buy brownfield (ready) and greenfield (new) commercial properties and sell them to other private equity funds later.  “The property markets are volatile and like other big investors, Piramal group is also cautious about investing in real estate,” the source said.  The fund was a brainchild of Anand Piramal, founder of Piramal Realty and executive director of the group.

 This is the second time any entity’s plans to float a real estate fund have been shelved in the recent years. Last year, a real estate fund floated by former Infosys chief financial officer TV Mohandas Pai and Manipal Group scion Ranjan Pai to invest in tier-2 developers was put on the back-burner due to market conditions. 

When contacted, a spokesperson for Piramal Realty neither denied nor accepted the news. “We are optimistic about the future of commercial real estate in India and believe that the next few years are an opportune time to acquire land and consolidate. We continue to look for good land parcels for both commercial as well as residential developments. We remain enthusiastic about collaborating to create increased value at the right time, for the right opportunity and with the right partner,” said the spokesperson.

Piramal Enterprises, one of the most aggressive lenders to real estate developers, has been reducing its exposure to property sector as it looks to derisk its portfolio and scale up non-real estate book.

The share of real estate in its loan book has come down from 85 per cent in September quarter of FY17 to about 74 per cent in the same quarter this financial year. It expects the share of real estate to fall to 50 per cent in the next two years as the share of other sectors grow.
 

Piramal Capital, the fund management and investment arm of Piramal group, changed its strategy from floating its own PE funds to do joint ventures with global investors such as CPPIB and Ivanhoe Cambridge. 

WHAT WAS THE PLAN 

• The PE fund, a brainchild of group's Executive Director Anand Piramal, was to buy brownfield, greenfield properties 
• This is the second time a realty fund plan of a sponsor has been shelved 
•  Piramal is reducing its exposure to property sector
• The share of realty in its loan book has come down from 85 per cent in Q2 FY17 to about 74 per cent