Bangalore-based realty developer Puravankara Projects is planning to raise nearly $300 million (Rs 1,320 crore) to fund its new projects and buy land in the current financial year. The company will be raising $150 million through bank debts to fund new projects and the remaining amount from private equity investors for buying land, said Ravi Ramu, director (finance), Puravankara. The company is eyeing PE funding as commercial banks have put curbs on loans for buying land. Currently, Puravankara has a land bank of 125 million sq ft.
The company’s plans come on the back of a sharp fall in the BSE Realty Index, along with a rise in lending rates, curbs on external commercial borrowings (ECBs) for developers, a fall in pre-sale deals for residential apartments, among others, leading to restricted cash flow to developers. The BSE Realty Index has fallen by 61 per cent from its peak in January.
Property developers are looking at raising PE funds in a big way by diluting stake in project-specific special purpose vehicles (SPVs) by committing an internal rate of return (IRR) of over 20 per cent. Unitech, the country’s second largest developer, raised $175 million from global private equity major Lehman Brothers for its Mumbai project.
“Though some of the private equity funds have raised their expectations on returns, there are a good number of such investors willing to do deals at reasonable levels,’’ said Ramu.
Puravankara’s mass-housing arm Provident Housing recently announced that it would invest nearly Rs 8,000 crore in seven affordable housing projects spread across Bangalore, Chennai, Hyderabad, Coimbatore and Mysore in the first phase.
Of this, Rs 750 crore would be raised through private equity funding at the project level.
The company plans to raise the remaining Rs 7,250 crore through a mix of internal accruals, debt and customer advances. In the second phase, the company plans to take its low-cost housing projects to Delhi, Kolkata, Kochi, Jaipur, Pune and Nagpur.
According to reports, Provident has plans to raise $125 million from the Credit Suisse Group. However, Ramu declined to comment on its talks with Credit Suisse.
Source: Business Standard