KKR floats real estate-focused NBFC in India with investment from Singapore’s GIC

Private equity giant KKR has established a new non-banking financial company (NBFC) that will provide structured credit solutions to the real estate sector in India, with an investment from GIC, Singapore's sovereign wealth fund, it said on Thursday.

This is KKR's second NBFC in India. Through its first, KKR expanded its capabilities to provide solutions across the capital structure. Since 2009, KKR has extended more than $2 billion of structured financing to 21 business groups in India through its credit and capital markets business.

"The launch of the India-focused NBFC marks a milestone for our global real estate platform, and we are thrilled to bring long-term capital to India's real estate sector," said Ralph Rosenberg, global head of KKR Real Estate.

"We are excited to assist a sector that is still under-built. While many lenders provide debt to this sector, there is a need for solution-oriented, non-dilutive capital for property developers. We intend to fill that gap and contribute to the continued development of India's residential and commercial real estate sectors,” he added.

"This sector-focused NBFC further enables KKR to provide tailored financing solutions to companies, and adds to our established private equity and lending businesses in India," said Sanjay Nayar, CEO of KKR India.

During 2014, KKR initiated the real estate business in India by structuring and participating in three transactions with an aggregate amount of approximately $190 million.

In private equity, KKR has been active in India since 2006, with total equity investments exceeding $1.5 billion.

Since launching a dedicated real estate platform in 2011, KKR has committed over $1.8 billion of equity to 29 real estate transactions in the US, Europe and Asia.

KKR's global peer Blackstone has also been active in striking real estate deals in India, primarily buying commercial realty assets. It also has a separate partnership with Embassy Group for such deals.

GIC, one of the most active sovereign wealth funds in India, has been particularly bullish on real estate over the past few months.

Last month itself it struck two deals. In a rare control-styled transaction by a sovereign wealth fund, GIC agreed to acquire a significant minority stake in public listed IT park owner Nirlon Ltd for Rs 660-784 crore ($105-124 million) and has made an open offer to buy more which could make it a majority shareholder.

This came soon after it inked a joint venture agreement with Gurgaon-based developer Vatika Goup to develop two residential projects in Delhi-NCR.

Recently, it also formed an alliance with Bangalore-based Brigade Group to jointly invest up to Rs 1,500 crore ($247 million) in residential developments in select cities of South India.

A number of investment firms besides real estate & infrastructure developers have formed alliances with global investors for investment and development of real estate in India. In February last year, Piramal Enterprises Ltd and Canada-based CPPIB Credit Investments Inc joined hands to offer rupee debt financing to residential projects in major urban centres of India. The two partners committed an initial investment of $250 million each for the same.

Last March, The Xander Group Inc. and an investor consortium led by Dutch pension fund asset manager APG Asset Management NV, announced the creation of a $300 million (Rs 1,800 crore) venture that will buy income generating, institutional grade commercial assets across India’s main office markets.

Three years ago, Godrej Properties forged a residential property development platform with a string of foreign institutional investors led by Dutch pension services provider APG. The platform focuses on developing mid-income residential properties in Mumbai, Delhi-NCR and Bangalore besides looking at opportunities in Pune and Chennai. Godrej Properties is the exclusive developer of the projects and also gets development management fee.

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