In an interview with BusinessLine, Khushru Jijina, MD, Piramal Fund Management, said there is a pressing need for realty funds, with developers increasingly seeking early stage funding. He said that the company’s new joint venture partner Ivanhoé Cambridge may even look at scaling up its investments once the first tranche gets deployed over three years. Excerpts:
Piramal has been in talks with Ivanhoé for couple of months. What was the delay due to?
We wanted all the players to be comfortable in the deal. The deal has happened at the right time. This platform has been done purely for equity. Post Lehman crisis, this is the first foreign equity deal that has come into the country. There are a couple of small domestic players who do equity deals but Ivanhoé is one of the biggest overseas player that has come into the domestic realty market. The focus is on pure equity with a long-term investment horizon of 7-10 years.
Real estate has been seeing the worst few years. We see that consolidation has started. Developers who are far from corporate governance are all getting wiped out. Customers are deciding which developers will stay. Developers believe that it is time take new positions. All of them are talking of joint development because there is no money to buy the land or even capital. So funds like Ivanhoé play a role, as they put in the equity. We are speaking to at least five key developers in major metros for funding.
Piramal’s portfolio has really widened from flexi-lease rental, structured debt and now pure equity...
We understand the real estate business. We are in pure equity, structured debt, construction finance and bulk buying of apartments. We are present across the spectrum and nobody has this kind of exposure. We want to cover all aspects of real estate funding. We are bringing our skin in the game. For every investment that they (Ivanhoé) are making, we are also putting 50 per cent.
What is the tenure of the partnership with Ivanhoé ?
The investments from the partnership will be done overthree years, with a 7-10 year investment horizon. We expect to deploy the first tranche sooner than that. Ivanhoé may increase the amount after the first full deployment.
Have you made any commitment for this platform?
Yes, we are in talks with various developers. We expect to deploy ₹200 crore each in about six to eight deals in the coming months.