India: IIFL Group, others to invest $45m in Mumbai slum redevelopment project

The IIFL Group and some of its wealthy clients are investing Rs 300 crore  in a real estate project in the western Mumbai suburb of Borivali, which will come up on redeveloped slum land, a company executive said.

The investors—IIFL Holding Ltd’s non-banking financial company India Infoline Finance Ltd, private equity arm IIFL Alternate Asset Advisors Ltd and the clients—have disbursed Rs.100 crore as the first tranche, which will finance the relocation of slumdwellers, procuring government approvals and initial project expenses.

The project, which will create a saleable area of about 850,000 sq. ft of residential space, is being developed by Radius Developers, in partnership with Deserve Builders and Developers Ltd. While Deserve Builders will primarily look into the slum component, which will involve obtaining approvals and clearing the land, Radius will build and market the project.

Real estate development through slum redevelopment usually takes long and sales will begin only after a year.

“The project has received the mandatory letter of intent to start the process of clearing the slums. This is a zero-coupon, structured debenture issue where the returns are going to come from the profits of the project,” said Balaji Raghavan, head, real estate practice, IIFL.

This is Radius Developers’ second slum redevelopment project. The company’s strategy so far has been to take up projects in Mumbai and Pune that have been stuck for several reasons and then launch or relaunch them under the Radius brand, market and sell them, and enter a profit-sharing agreement with the existing developer through a joint venture.

“There are a number of costs involved in the primary stage of a slum project and this money will be used to fund rental accommodation for slum dwellers and for project permission,” said Sanjay Chhabria, managing director of Radius Developers.

IIFL Alternate Advisors has funded its share in the transaction from its recently raised IIFL Real Estate Fund (Domestic) Series II, a Rs.1,012 crore residential-focused fund.

Until recently, institutional investments in slum projects were rare due to various complications and lengthy procedures typical of such developments. However, some have lately ventured into them.

In August, Piramal Fund Management Pvt. Ltd invested Rs.200 crore in Omkar Realtors and Developers Ltd’s Dhobi Ghat slum redevelopment project in Mumbai. Piramal has deployed a dedicated redevelopment fund that has funded both slum and society redevelopment projects in the city.

Real estate developers have been actively raising capital, more so when the sector is undergoing a slowdown. They need the comfort of institutional funding to either refinance existing debt, make payments for land and approvals and for some, for project completion either through equity or debt.

“There is a lot of institutional capital available in the market today and real estate firms have more access to capital. However, most of the funding is available in the form of debt or in a structured debt-equity format where the fund ensures a certain form of fixed return or collateral and security,” said Shashank Jain, transaction services partner with PricewaterhouseCoopers India, a consultancy firm.

Also Read: India: Real estate player VBHC may raise $20m from Tano Capital, Ambit to fund ongoing and new projects

This article was first published on Livemint.com

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Following vacancies can be applied for (only in Singapore).   

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.