With this investment, project developer Assetz Property Group has raised about $250 million for its residential projects so far
JP Morgan Asset Management Co. Ltd is set to invest about Rs.200 crore in Singapore-headquartered Assetz Property Group to help the developer buy a 20-acre land parcel in north Bengaluru to build a villa project, said two people familiar with the development.
The deal will be signed this week, they said.
The proposed project, for which the land is being bought, is a villa and row-house development near Yelahanka and will be launched early next year.
“The capital will be given in the form of equity by JP Morgan. The project is yet to be named but it will be launched as soon as the approvals come in,” said one of the two people mentioned above, who did not wish to be named.
Assetz declined to comment and a JP Morgan spokesperson didn’t respond to an email.
With this transaction, Assetz, which has a number of premium residential and commercial office projects in southern India, has raised about $250 million for its residential projects so far.
In the past, it raised around $116 million from private equity (PE) and venture capital firm Equis Funds Group Pte Ltd for its mid-market housing vertical. It has also raised money from property consultancy Jones Lang LaSalle’s real estate investment arm Segregated Funds Group, Avenue Real Estate Fund and Amplus Capital Advisors Pvt. Ltd.
In March, the company announced the launch of its township brand Assetz Lifestyle, under which it will build a range of mid-market housing projects. Over the next 10 years, it plans to build around 10,000 homes along the growth corridors of Bengaluru and expects to generate about Rs.5,000 crore in revenue from this business.
Assetz also recently ventured into the warehousing and logistics sector and is developing an 88-acre logistics park in Bengaluru. It plans to raise about Rs.400 crore for this business.
PE funding in the real estate sector has remained robust despite the slowdown that has continued for more than two years. Real estate-focused funds invested about $410 million in residential, office and retail projects between January and March this year, compared with about $680 million in the corresponding period last year, according to VCCEdge, which tracks investments, and Mint research.
Equity financing by PE funds is a rarity these days, as most investors are busy offering debt to developers to help them refinance old loans and construct projects.
“Some investors are willing to give equity capital but to only a select few developers with good pedigree, high corporate governance standards and good project portfolio. Equity for land acquisition makes sense because it’s early stage investing, which involves risk and also promises a better upside,” said Chintan Patel, partner, transactions and restructuring, real estate and hospitality, KPMG India.
Patel added that equity financing would make a cautious return once there was enough downside protection for investors.