Singapore wealth fund GIC to invest $300 mn in DLF projects

Investment comes at a time when Indian real estate sector continues to be extremely sluggish

DLF, India’s largest real estate company, has formed a 50-50 joint venture with GIC, Singapore’s sovereign wealth fund, to develop two residential projects in New Delhi. While GIC will invest $300 million (around Rs 1,990 crore), DLF will develop the projects. The investment, which needs to be approved by the Competition Commission of India (CCI), has come at a time when the Indian real estate sector continues to be sluggish.

Located along Shivaji Marg in New Delhi’s Moti Nagar area, the projects would come up over five million sq ft, sources said. The launch is expected within a year, while construction could take up to five years. Though a decision on this is yet to be taken, the construction work could be outsourced to another company, it is learnt.

DLF is likely to use the money raised from GIC to part-service its debt, pegged at Rs 21,600 crore as of the end of June this year. On Wednesday, the company’s stock rose 3.4 per cent over its previous close on BSE to end at Rs 109.60 a share.

GIC has invested in India’s real estate projects earlier as well. For instance, it had last year entered into a Rs 1,500-crore JV with Brigade Enterprises to develop properties in southern parts of the country.

In recent past, other pension and sovereign funds have also been keen on Indian real estate. Among those, CPPIB Credit Investments, a subsidiary of Canada Pension Plan Investment Board, entered into a pact with Piramal Enterprises for a $500-million realty debt fund.

Also, Xander Group and a consortium led by Dutch pension fund APG Asset Management were in a $300-million venture for an office realty project.

Reports suggested DLF might go for more such ventures with private equity firms, to reduce its debt.

JOINING HANDS
Much-needed relief for the Indian real estate sector

• The joint venture aims to develop two residential projects in New Delhi
• Launch is expected within a year; construction could take up to 5 years
• GIC's investment comes at a time when Indian real estate sector is sluggish
• DLF is likely to use the money invested to part-service its debt of about Rs 21,600 crore (as of June-end)
• DLF might go for more such ventures, with private equity firms, to reduce its debt.
• In recent past, other pension and sovereign funds have also been keen on Indian real estate

Elaborating on its latest deal with GIC, DHL said: “The JV (between DLF Home Developers Ltd, a wholly owned subsidiary of DLF, and GIC) is expected to benefit from GIC’s experience of investing in integrated developments across the globe.”

“We hope that this investment is a beginning of a new relationship with GIC at the project level. We look forward to working together with GIC in many projects, both residential and commercial,” said Saurabh Chawla, senior executive director (finance), DLF Ltd. “Going forward, such project-level investments will lead to unlocking of embedded value in many of DLF’s development projects.”

This might potentially unleash many more signature developments and herald a new era of smart cities, said DLF Chief Executive Mohit Gujral.

Loh Wai Keong, managing director and co-head (Asia), GIC Real Estate, said GIC was confident of India’s long-term growth potential and that it would continue to tap into the attractive opportunities of India’s real estate sector. “We hope to leverage our mutual strengths to grow this partnership with DLF and to collaborate on more projects in the future. Globally, we have successfully nurtured long-term partnerships with strong and well-established developers across our key markets, and we hope to do the same with DLF in India.”

DLF had reported a five per cent decline in its consolidated net profit to Rs 121.55 crore for the quarter ended June, mainly on higher finance cost. Its net profit had stood at Rs 127.70 crore in the same period last year. The company’s net debt had risen by Rs 633 crore to Rs 21,600 crore as at the end of the first quarter of 2015-16. In a presentation after the June quarter, the company had said it was looking at raising private equity funds at the project level, to reduce debt.