Piramal Fund Management, the real estate investment platform of Piramal Enterprises, has invested Rs 1,200 crore ($191 million) in Omkar 1973 Worli, an ongoing luxury residential project of Mumbai-based developer Omkar Realtors & Developers Pvt Ltd in the form of debt, the company said on Monday.
The investment has gone from the debt platform of the company which includes Rs 800 crore from the newly created construction finance arm. Of the total corpus, Rs 400 will be used by the developer to pay debt and the rest (Rs 800) will be used to fund construction. The construction funding has been given against 20:80 scheme of the developer.
“The construction finance component of our transaction will be used towards funding interim construction costs under this scheme and is further secured by both the 80 per cent receivables from the area sold as well as a substantial portion of additional area retained as security on a senior and exclusive basis,” the company said.
A 20:80 scheme lets buyers pay 20 per cent of the price while booking the home and the remaining 80 per cent at the time of possession.
This is one of the biggest transactions in Indian residential realty market in recent times.
Omkar 1973 Worli has three high-rise towers spread over nine acres located off Annie Besant Road. The project has been designed by Foster + Partners and has received all approvals for construction. Of the three towers, two are midway to completion and are expected to be delivered and handed over by the end of 2017.
Omkar has over 20 million sq ft under various stages of development in Mumbai across residential and commercial spaces.
Omkar has been a long-term developer partner for Piramal. It has sealed a number of deals with the firm, the latest being an apartment bulk-buying deal in an ongoing project Alta Monte located in Malad (E).
Khushru Jijina, managing director, Piramal Fund Management, said, “This is a novel structure with a combination of senior debt as well as project funding secured against a successful 20:80 scheme in a project that is clearly established with 60 per cent sales and visible construction progress”
Babulal Varma, managing director, Omkar Realtors, said, “With this funding, we have achieved full financial closure for the construction and development completion of Omkar 1973.”
Recently, the fund house had announced its foray into construction finance with a project pipeline of Rs 1100 crore. The firm is now aiming to add to it and build its construction finance loan book to around Rs 5,000 crore ($803 million) by March 31, 2016 or end of next financial year.
Earlier, the firm conducted debt deals as a combination of structured funding, funding towards refinance and funding towards late stage/last mile completion. These deals were also senior secured in their nature but had more flexible structures. With construction finance, Piramal Fund Management has entered the space usually occupied by banks wherein it is strictly for construction with disbursements also taking place as per construction milestones.
(Edited by Joby Puthuparampil Johnson)