Money Zone

We tend to deploy anywhere between Rs.1,000 crore and Rs.1,500 crore every month

December 2016
- Khushru Jijina, Managing Director, Piramal Fund Management

Piramal Fund Management (formerly known as Indiareit) is a pioneer in the real-estate fund space in India, with a platform built on proven fund management expertise and a realised track record in fund raising and exits. Khushru Jijina, Managing Director, Piramal Fund Management, shares more on the company┬┤s funding options for the real-estate sector.

Innovative forms of investments such as themed funds and construction finance are replacing plain equity...
This is the need of the hour. We firmly believe each transaction is unique and each funding structure must be customised to either solve or suit the situation at hand. The project must be able to sustain the implied cost and tenure of the funding structure. As long as the project is well planned and the underlying demand dynamics are robust- more often than not, we are only funding a cash flow mismatch between receivables or collection and construction progress. In the next phase of growth, most projects are then able to generate sufficient free cash flows to repay the funding obligations within the predefined timelines.

What funding options do you offer builders and developers? Over the past two years, how much funds have you raised for the real-estate industry?
We are in the unique position of being able to cater to the entire capital stack, ie early-stage equity to mid-stage mezzanine or structured finance, and even senior secured debt and construction finance. Additionally, we have focused strategies to fund redevelopment, land and bulk buying of individual units.

We are able to act as perpetual capital providers on behalf of both, external funds raised and our own proprietary capital, and tend to deploy anywhere between Rs 1,000 crore and Rs 1,500 crore every month.

Which segments within the real-estate sector do you prefer lending to?
Our platform has a strong residential bias given the simple dynamics of demand and supply in the housing segment along with the self-liquidating nature of the asset class. Today, the platform enjoys a funding relationship with most Tier-I developers across our five target cities and tends to be the first point of call for any residential funding opportunity, regardless of stage of entry and structure of finance required. Similarly, on the debt side of the business, we have expanded our remit towards the commercial segment as well. We will primarily be funding commercial through construction finance and senior secured debt. We see a gap building out in the way greenfield and brownfield commercial development is currently being funded. The typical sources of finance for such developments, ie banks and loan against property (LAP) or lease rental discounting (LRD), are restrictive and somewhat inflexible in approach by primarily being available for fully completed and fully leased assets. We hope to cater to bridging this gap with customised and flexible financing solutions as we have done for residential in the past.

What is your funding option for companies who want to expand and diversify their business?
Is there a cap attached and what benefits can they avail from the same? We believe real-estate is an extremely local and specialised business and our ability to add value extends beyond just capital. We have a large portfolio given that we manage in excess of $3 billion and have real-estate experience and expertise in house. Therefore, we tend to be a preferred partner for providing growth capital to real-estate developers because of both our understanding of the space and flexibility of capital. We do, however, prioritise our focus on the relationship itself. This is evidenced in the fact that most of our transactions are repeat deals with existing development partners. Therefore, those developers who wish to seek funding from us are well aware of our ability to be a long-term partner in their growth and the associated benefits that they derive from having a perpetual source of patient capital so long as they meet our stringent underwriting criteria. Such funding is based on businesses and not subject to any cap.

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