Piramal's real estate fund seeks extension of one more year from investors

Indiareit Fund Scheme V, a real estate fund of the Piramal Group, has sought extension of one more year from its investors to exit the rest of its portfolio. Citing bad market conditions in the real estate sector, the fund has said it is still stuck with six real estate investments across India and expects an early resolution of these projects. 

In a communiqué to its investors, the Piramal Fund Management said the fund was launched in 2013 with a primary tenure of six years, extendable by up to two additional one-year periods, by the trustee. The fund had made 10 investments and has to date fully exited from four of them, with partial exit from one investment.

Total distribution made by the fund is 55 per cent of the fund corpus, which includes 35 per cent towards return of capital and 20 per cent towards return on capital. Exits from the residual portfolio investments will require additional time and hence, the fund would be pursuing the first annual extension, it said.

Piramal is not the only fund seeking an extension for its real estate investments. In June, Aditya Birla Real Estate Fund said it was in the process to liquidate its portfolio after it failed to secure exit from eight of the 13 investments made. 

Aditya Birla Fund blamed headwinds in the real estate sector due to a demand contraction, causing massive build-up of unsold inventory. Two other funds are facing a similar fate, said a source.

In a statement, Piramal Fund Management said: “According to standard corporate policy and as governed by Sebi and in the spirit of transparency, Indiareit Fund V has shared the current status of residual investments with all its investors. The investment advisor will continue to manage the residual investments towards their ultimate monetisation during the remainder of the extended fund term. Piramal Fund Management remains committed to deliver improved performance and consistently create long term value for its stakeholders.”

Giving details of the projects, Piramal Fund said it had made investments of Rs 100 crore in The Center Court of Ashiana LandCraft in Gurugram in 2013, but as Gurugram land prices fell, this had a ripple effect, with newer land parcels being bought at lower prices, leading to new launches at lower prices.  “The fund has already made distributions aggregating to Rs 106.7 crore, against an investment of Rs 100 crore on account of the payment of coupon on listed non-convertible debentures, partial redemption of capital, and sale of debentures. We are engaged with the promoters to arrive at a solution for a complete exit,” it said. 

It made another investment of Rs 40 crore in May 2015 for an apartment project situated at the banks of the Bellandur lake in Bengaluru. A National Green Tribunal (NGT) order was passed in May 2016, which imposed a new buffer zone of 75 metres for lakes and wetlands, which would be a no-construction zone due to which this project was stuck. 

The Supreme Court has recently set aside the NGT order preventing construction within the 75-metre buffer zone around lakes and going forward, the previous development rules would apply. But due to a three-year delay, the fund will not get the price it paid for the land, it said.  The fund also made an investment of Rs 66 crore in a residential project by Ashiana Homes, Gurugram, which turned bad. Another investment of Rs 120 crore was made by the fund in 2015 across two projects in Pune with Darode-Jog Properties. 

Both these projects have been affected due to delay in receipt of approvals and slow construction. The fund has now initiated Insolvency and Bankruptcy Code (IBC) proceedings against the builders to recover its funds. 

An investment of Rs 200 crore was made by the fund with Aristo Developers. This also turned bad due to weak financial condition of the company. Both the projects are on hold currently, and the company is now under the IBC.  Further action on the matter will be decided by the committee of creditors in due course, it said.