CCIS: 2401 Baring may invest 350cr in Bangalore realty company

BANGALORE: Baring Private Equity Partners India (BPEP), along with some of its international investors, is likely to invest about $75 million, or approximately Rs 350 crore, in the Bangalore-based Century Real Estate.

Baring’s individual commitment to the deal is around $53 million, while overseas investors who are backing the fund may bring in a little over $20 million in additional investment. Industry sources say that Baring has initiated the diligence process. As the realty firm is still working out the commercial terms, sources say the deal could be closed in February. When contacted, Century Real Estate managing director Ravindra Pai did not confirm or deny the development.

The Baring-led investors may pick up around 26% stake in the holding company, which is one of the largest land aggregators with an estimated 3,000 acres of land bank in south India. The investment may be deployed as seed capital to develop multiple townships around Bangalore. E&Y and KPMG are assisting with the due diligence.

Century Real Estate is majority owned by real estate entrepreneur Dayanand Pai and his family. The Manipal Education and Medical Group (MEMG) promoters also have minority investments at SPV (special purpose vehicle) levels.

BPEP, which manages assets worth about $1 billion, issued a term-sheet for a possible investment two months ago, sources added. An alternative possibility of the PE fund investing into an SPV holding a clutch of assets is also being considered. When contacted, a Baring India official refused to comment.

Last year, Century embarked on raising $120-150 million and has held talks with PE investors, including DE Shaw, Apollo Management , Morgan Stanley and Baring. US-based Fortress Capital is an investor in the company, and a part of the $150 million investment was aimed at repaying some of the Fortress investment made through convertible instruments. BPEP, spearheaded by Indian private equity veteran Rahul Bhasin, roped in Varun Batra who headed Citigroup’s real estate investments in India to cut opportunistic deals in this comeback sector.

Century has 14 projects spread across 1.2 million sq ft under various stages of development. The realty company raised Rs 400 crore in debt some six months back to fund its projects. The firm is planning to develop an additional 1.7 million sq ft in the next financial year. It is investing Rs 250 crore in a 68-acre integrated township close to the Bengaluru International Airport. The company has also entered into a management contract with hospitality major Four Seasons to set up a luxury hotel in Bangalore. The project, which broke ground last week, is expected to be completed by 2013. It will also house 100 branded residences, high-end retail stores and commercial complexes.

LICHF arm plans Rs 750 cr realty fundarm plans Rs 750 cr realty fund

MUMBAI: LIC Housing Finance Asset Management Company , a unit of LIC Housing Finance, which figured in the bribes-for-loan scam, is planning a Rs 750-crore real estate fund and is looking for people to manage it.

The company is considering senior executives from Mumbai-based Edelweiss Securities and realtor Tishman Speyers for top positions and candidates from Trikona and realty fund IndiaREIT for the midmanagement level, according to people involved in the recruiting process.

LICHFL Asset Management will raise Rs 500 crore with a greenshoe option of Rs 250 crore through co-sponsors LIC and LIC Housing Finance, who will put in about 20% of the corpus.

“The aim is to tap middle income housing opportunities,” LICHFL Asset Management CEO Arun Goel told ET. “Recruitment is an ongoing process and we will build on the team once the fund is closed and we get into investing.”

Goel said his company had factored in the 2008 crash and the more recent bribes-forloan scam while deciding to launch the fund. He said the fund would target a 22% return.

RBI’s Decision to Hike Policy Rates May Affect Real Estate Sector- JLL

Real estate developers and consultants on Tuesday said RBI’s decision to hike policy rates by 25 basis points will affect the sentiment of the property market, but they do not foresee any major impact on housing demand and prices. “The hike in repo and reverse repo rates by 25 basis points will have a sentimental impact on demand, but it may not slowdown the demand in its actuality,” Jones Lang LaSalle India Chairman and Country Head Anuj Puri said.

Home buyers might delay their decision to own property, which would prolong the completion of the transaction, Puri pointed out. On housing prices, Puri said it would remain stable in the metro cities. Commenting on the RBI’s policy, DLF Group executive director Rajeev Talwar said: “The growth of economy is strong, so we do not expect any negative impact on the property demand and prices”. Talwar said he did not forsee any rise in interest rates. Parsvnath Developer chairman Pradeep Jain said that there could be a short-term impact because of rate hikes but would not have major affect on demand, which is directly related to growth in the economy which is firm.

“As far as rate hike impact on real estate sector is concerned, I see a short-term impact initially which is a normal and routine phenomenon. In fact since March 2010, rates have been increased six times but it has not impacted the demand and growth in the sector significantly,” Jain said. Assotech managing director Sanjeev Srivastava said: “It was expected. This will hurt the sentiments of the property market, but will not have any major impact on demand as housing prices are competitive in many markets including Noida.”

Talwar of DLF noted that the government needs to do much more on the supply side to contain inflation. “The more you try to curb demand and not increase housing supply, the prices would rise in long term”.

Blackstone to Finalise its First Real Estate Deal in India Soon

Blackstone, the global private equity giant based in the US which has a corpus of $9.5 billion, is understood to be closing in on its first real estate deal in India. The private equity fund, present in India with its real estate team for the past three years, is understood to be in discussions with Bangalore-based Embassy Property Development to invest around Rs 200 crore in one of its projects.

Embassy Property Development is understood to be raising private equity even as it is awaiting Securities & Exchange Board of India (SEBI) clearance for a planned public offer of Rs 2,400 crore which is expected during this calendar. The issue is expected to be managed by investment banks UBS, Citigroup, Nomura and Edelweiss. While Blackstone could not be reached for comments, Embassy denied any such plans of raising funds from Blackstone. According to recent reports, Embassy was also in talks with Temasek and HDFC Property Ventures for a $100 million private equity infusion, the status of which is not yet clear

Mafatlal’s Byculla land sale likely to be delayed

MUMBAI: The proposed sale of Mafatlal Industries’ seven-acre land near Byculla zoo in central Mumbai is unlikely to be concluded anytime soon due to fear that the state government may scrap the policy of allowing extra floors if developers build public parking space in their residential projects.

Lodha Developers was the frontrunner to bag the land parcel with its Rs 1,200 crore bid against the reserve price of Rs 1,000 crore. However, there has been no discussion on the transaction for nearly three months as the state government is reviewing its floor space index (FSI) policy, a person close to development told ET.

“There is no clarity on parking FSI policy of the state government, it is being reviewed and most likely it will be scrapped,” the person said on condition of anonymity.

Implemented in April 2009, the parking FSI policy offered realtors extra FSI of maximum up to four floors, provided they constructed multi-storey parking facility on their land and handed it over to the civic administration free of cost.

Recently, opposition parties, social activists and town planning experts said the policy was being misused and most parking slots were approved only in central Mumbai. It was brought to the state government’s notice that more than 20,000 car-parking slots were approved in the central Mumbai’s Sewri, Worli and Lower Parel in just about an year’s time.

The government is now reviewing the policy and there is speculation that it may scrap the policy altogether, although there is no official word yet.

This has hit Mafatlal’s plans. “Earlier bids for Mafatlal’s Byculla land were completely based on the math of parking FSI, which is not going to be the case,” the person said. “Commercials of this deal will change substantially. If the deal gets concluded hereon, it will be at a much lower price,” he added.

Real estate market in Pune & Suburbs

In the City Profile series that evaluates the real estate markets of different cities across India, ET Wealth and Magicbricks take a look at Pune.For mid-income homes , most new launches are now in western Pune in locations like Hinjewadi, Wakad, Pimple Nilakh, Pimple Saudagar, Aundh and Balewadi. The increase in supply has also kept prices in these locations affordable.

Buying options (Average property rates in Rs per sq ft)

Locations in demand

Aundh: High rental demand from software professionals from Hinjewadi IT Park; good infrastructure and central location.

Baner: Proximity to the Mumbai-Pune expressway, good connectivity to city centre and lower rental and capital values compared to Aundh make it an attractive destination.

Kharadi: Location on Pune-Nagpur Road and proximity to international airport have sustained demand.

Price appreciation compared to cities in the region

There was a minor correction in property prices at some locations in Pune in 2008. However, an abundance of residential property has resulted in a slow pickup in prices compared to most cities in the region.

Growth drivers

Some big infrastructure projects under way that could influence real estate prices in nearby locations

Road transport

The Pune Municipal Corporation recently approved a proposal to implement the Bus Rapid Transit System (BRTS) on 27 more roads in the city. Prominent among the selected roads are Tilak Road, Bajirao Road, Shivaji Road, Fergusson College and Jungali Maharaj. The total length of the BRTS will be about 101 km. In the first phase, it will be implemented on roads which have already been widened to 36 metres.

Century Real Estate Plans to Raise Rs 700 crore Through PE Players

Century Real Estate Holdings, the realty development arm of three-decade old Bangalore-based Century Group, is looking to raise Rs 700 crore through private equity players in three tranches. The company which during the past four years have been focusing on development of projects, is understood to be effecting this deal at the holding company level. The company which raised around $200 million from Goldman Sachs during the recession of 2008-09, is beefing up its land asset base in the development holding arm to cross the 1,500 acre mark to raise additional funding. The Group during during 2010 is understood to have launched projects spanning 1.2 million square feet and is looking to launch projects spread over 1.7 million square feet during 2011.

The company currently has 343 acres from 12 SPVs (Special Purpose Vehicles) under its control and is set to add another 1,205 acres by merging another 32 SPVs into itself as it embarks on the fresh round of fund raise which is expected to tied up within third quarter of calendar 2011.

The first round of Rs 200 crore is expected within March 2011. Investment bankers close to the deal indicate that Century is in discussion with global & Indian private equity giants including Morgan Stanley, Goldman Sachs, Kotak Realty Fund, Baring Private Equity, HDFC Realty Fund among others for this deal. Howeve, the management of Century Real Estate Holdings declined to comment. Century Real Estate which had earlier initiated discussion with bankers for a possible public offer, seems to have put those plans on the back-burner and is actively courting PE players now. Century has been focusing heavily on development of residential projects with as much as 90 per cent of its development focusing on developing these units, while the rest has been for commercial projects. Bankers indicate that Century may be working towards a ratio of 70:30 (residential – commercial) over the next few years.

The PE fund raising is slowing picking up in the Bangalore real estate market with as much as $1 billion waiting to be raised from a clutch of players. Shriram Capital is close to raising $100 million from TPG, Brigade Group is looking at around Rs 500 crore most probably through the QIP route, while Embassy may come in with its Rs 2,400 crore IPO during 2011 and Mantri Developers looking to raise another Rs 500 crore.