Civil construction and real estate major Shapoorji Pallonji & Company Ltd (SPCL) has formed a joint venture platform with Standard Chartered Private Equity, IFC, and Asian Development Bank to develop affordable housing in India, the company said in a statement.
It said the platform has a commitment of $200 million (Rs 1,250 crore) and will look to develop about 20 million sq ft of affordable housing homes across the country spanning cities such as Mumbai, Pune, Delhi NCR, Chennai, Kolkata, Bangalore and Ahmedabad in eight years.
It did not give a break-up of the investment, but previously IFC, the private sector investment arm of the World Bank, had disclosed Shapoorji Pallonji will bring in 30 per cent of the total $200 million capital or $60 million, with the rest coming from other investors.
Interestingly, IFC had earlier proposed to lend around $30 million to the venture through long-term tenor but has come in as an equity investor. IFC in a separate disclosure recently said it will invest around $35 million in the equity capital of this platform. This means, Standard Chartered PE and ADB together brought in around $105 million.
This is the first new investment by StanChart PE in a year. Last year, it had invested in Sterlite Power Grid Ventures.
Meanwhile, Shapoorji Pallonji said the focus of the new platform will be on both tier-I and tier-II cities with project sizes in the range of 1.2-5 million sq ft. The new entity will have a dedicated team to build on the business plan and will launch these projects under a new brand.
The product configuration of these developments will predominately include 1 BHK apartments of 500-600 sq ft and 2 BHK apartments of 800-900 sq ft priced Rs 15-50 lakh per unit.
Privately held construction firm Shapoorji Pallonji is owned by the single-largest shareholder of Tata Group’s holding firm Tata Sons, Pallonji Mistry. One of his two sons Cyrus is currently Tata Sons chairman. The other son Shapoor manages Shapoorji Pallonji.
While a slew of developers has joined the affordable housing bandwagon of late, either under their parent company or through a separate arm, this is the first significant push with a large investor commitment.
Indian real estate space has seen a number of joint platforms for both commercial and residential segments. Shapoorji Pallonji itself has a tie-up with Canadian Pension Plan Board (CPPIB) for commercial realty. The platform recently struck its debut deal with the acquisition of an IT park in Chennai for an enterprise value of $220 million.
Recently, Bangalore-based realtor Nitesh Estates tied up with financial services giant Goldman Sachs to jointly invest up to $250 million in income-generating commercial assets.
On the residential front, Southern developer Brigade Group has a joint venture platform with Singapore’s sovereign wealth fund GIC for residential properties in Southern India. The size of the platform is $247 million.
Godrej Properties has a platform with Dutch pension fund APG among others and Piramal Enterprises has debt funding platform with CPPIB for residential projects.