ECL Finance Ltd, the non-banking financial arm of Edelweiss Financial Services Ltd, has backed a bunch of projects of Mumbai-based developer Rohan Lifescapes.
Mint reported that the firm has put in Rs 300 crore (around $44.25 million) through debt to take control of a part of stock across four projects of the realtor in South Mumbai. The report said the investor intends to sell the inventory at a discounted price through its own channel partners and brokers.
The proceeds would be used by the developer to finish ongoing residential projects. “The idea is to provide solution-centric investment to mid-sized and small developers to help them pace up sales velocity and project delivery in the current scenario. This is a capital plus value add route of investing,” the report quoted Ramashrya Yadav, chief executive, real estate practice, ECL Finance.
He said by taking control of a portion of the inventory, the lender is also, to some extent, ensuring that the execution is on schedule and the delivery on time.
Debt capital from NBFCs and private lenders has been the main source of funding for real estate players. Slow sales and a cash flow crunch have forced realtors to go for multiple rounds of financing, mostly to take out an existing lender and use the rest of the capital to finish projects. Edelweiss has been an active player in the real estate space and is considered one of the biggest refinancing institutions by industry experts.
Other firms that have continued to back the sector include Altico Capital, Xander Finance and Piramal Fund Management. Piramal Fund has come up with several new products suitable for the changing needs of realtors given the way industry has taken shape over the last couple of years.
Edelweiss has also backed projects of North-based developers such as BCC Infrastructure and Saya Homes. It has also backed Chennai-based privately held developer Landmark Housing Projects through non-convertible debentures besides making a small investment in another Chennai-based realtor VGN.
Capital flow in the real estate sector has somewhat slowed down in the first nine months of 2016. The realty space attracted a total of $2.57 billion, down 41% compared with last year, across private debt and equity, in the first nine months of the year, according to VCCEdge, the data research platform of News Corp VCCircle.
Of the total, debt formed as much as 84%, showing how realtors are banking on private debt capital to run their business as pure equity-driven deals slide and banks remain wary of lending to the sector.
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