Piramal's Indiareit plans new funds, diversification

Indiareit Fund Advisors, the property fund management company promoted by billionaire Ajay Piramal, plans to launch debt and rental yield funds soon and diversify into joint development and redevelopment of projects with land and property owners.

Indiareit’s new plans come at a time when it is widely believed that the Ajay Piramal Group is in the final stages of talks with Religare, the financial services group promoted by billionaire brothers Malvinder and Shivinder Mohan Singh, to sell it. The deal is expected to be signed in a couple of days, according to persons involved in the deal.

“Indiareit is not sold. Whether we have intention to sell it or not, I can not comment on that,” said Ramesh Jogani, managing director of Indiareit, which manages funds worth Rs 3,000 crore in domestic and offshore markets.

The new funds and joint projects are a part of Indiareit’s diversification plans. It usually does pure equity deals and invests in property projects.

“Currently, the accessibility of bank funds to developers is low and hence we see this as an opportunity to lend to property developers,” said Jogani, who holds a 15 per cent stake in Indiareit.

The debt fund will have a corpus of Rs 500 crore and Indiareit expected returns of 15 to 16 per cent from it, Jogani said. Apart from capital appreciation, the Rs 400-500-crore rental yield fund will solicit fixed returns of 10 to 11 per cent.

A number of fund managers like Kotak and HDFC property funds and portfolio managers like ICICI Prudential and India Infoline do mezzanine or debt deals, which normally carry fixed returns with capital protection and other clauses.

Other fund managers like IL&FS-Milestone, the joint venture between IL&FS Investment Managers and Milestone Capital Advisors, and Knight Frank-Anand Rathi, have also launched rental yield funds.

“World over, investors are withdrawing from development financing and diversifying into stabilised assets, which give guaranteed incomes,” said Amit Goenka, national director, capital transactions, Knight Frank India, a global property consultant.

Recently, Tata Sons-promoted Tata Realty bought an information technology park project from Kotak Realty Fund for Rs 525 crore. Last year, IL&FS Milestone Fund had picked up a 74 per cent stake in 247 Park of HCC in Mumbai.

Last year, Indiareit raised Rs 925 crore from domestic investors. It had committed Rs 90 crore in a joint development project in Electronics City and Rs 38 crore in Whitefield, both in Bangalore, and Rs 60 crore in a redevelopment scheme in Mumbai, Jogani said.

“We are looking at doubling money in 3.5 to four years or generating returns of 2x. In redevelopment projects, capital infusion is less and you do not get major hit in case the project does not work out well,” he said. However, Knight Frank’s Goenka has doubts on private equity companies getting into joint development themselves.