Big ticket realty investment being considered by KKR

In a bid to do large deals of Rs 1000 crore and above in Indian real estate, global private equity giant KKR is looking to lend from its proprietary book and other global sources, said a source in the know.

So far, it has done structured credit deals worth Rs 200-Rs 300 crore each. For bigger deals of Rs 1,000 crore and above, it is looking to draw money from its proprietary book and limited partners, the source added.

Currently, the PE fund lends to developers from its sector-agnostic non-banking financial company KKR India Financial Services and real estate-focused NBFC KKR India Asset Finance, which was set up two years ago, along with Singapore’s sovereign wealth fund GIC.

The source cited above said KKR’s move would help it compete better in the market with the likes of Piramal, HDFC and Indiabulls that do large lending deals.

Piramal recently gave credit lines worth Rs 15,000 crore to eight developers in the country including the Wadhwa Group, Subodh Runwal Group, among others. Developers can avail a lending facility of Rs 1,000 crore. Piramal disburses funds worth Rs 1,500 crore to real estate developers every month. Altico Capital, backed by Clearwater Capital and others, is looking to lend Rs 2,500 crore every year.

An email questionnaire sent to KKR did not elicit any response.

“KKR is able to tap multiple sources such as funds from limited partners, family offices in India and partners’ funds. It has built strong credentials in structured lending across sectors,” said the chief executive of an NBFC, which competes with KKR.

He said competition in real estate lending has intensified with the entry of KKR, Piramal, Altico Capital, Edelweiss and others.

KKR’s REALTY PLAY
The company does deals though KKR India Financial Services and NBFC KKR India Asset Finance with GIC
KKR India Asset Finance recently lent Rs 300 crore to Puranik Builders
KKR India Asset Finance invested Rs 700 crore last year
KKR committed funds of $2.7 bn in real estate globally
Raised $739 million for its first European realty fund
Its PE rivals Blackstone, Carlyle also invested in Indian properties
Source: Reports
According to Ajay Jain, executive director (investment banking) and head of real estate group at Centrum Capital, NBFCs’ exposure to the real estate sector is about Rs 35,000 crore and every year, NBFCs lend about Rs 10,000 crore to real estate developers.

The CEO of the NBFC quoted earlier said KKR lends developers at the rate of 13-18 per cent in early construction stage and at 15-20 per cent at the land stage.

Piramal also lends at similar rates. It lends at 20 per cent to buy a certain piece of land at 20 per cent, construction finance at 12 per cent and also has the option to lower the cost of funding by converting equity into structured debt (at 16 per cent) once the project takes off.

KKR India Asset Finance recently lent Rs 300 crore to Puranik Builders to fund two projects in Pune. The same NBFC invested Rs 700 crore in three real estate projects last year. It included Rs 200 crore in SARE Homes’ group housing project in Gurgaon, about Rs 250 crore in a township project of Bhartiya City Developers in Bengaluru and another Rs 250 crore in a luxury residential project called Parthenon in Andheri, a Mumbai suburb.

It did its first transaction in June 2014 when it invested about Rs 350 crore in Mumbai-based Wadhwa Group’s luxury homes project, The Address, in Mumbai’s Ghatkopar area.

KKR committed funds of $2.7 billion in real estate globally, reports said. Recently, it raised $739 million for its first European real estate fund.

KKR’s private equity competitors Blackstone and Carlyle have invested in Indian real estate in a big way. While Blackstone has invested $3 billion in office assets, Carlyle has invested in residential developers such as Jerry Rao’s VBHC. Last year, private equity firm TPG also bought commercial real estate brokerage Cushman & Wakefield in a $2-billion deal. Cushman has an Indian set up as well.

Credits Business Standard

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