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News & Views on Indian Real Estate

Monday, July 28, 2008

PE fund picks 40% in Amrapali SPV

Private equity fund SUN-Apollo Ventures has invested Rs 300 crore for 35-40% equity in an SPV of Noida-based realty firm Amrapali group. SUN-Apollo is a joint venture between Delhi-based Khemka family’s SUN group and US-based private equity fund Apollo Real Estate Advisors. Apollo’s development and investment portfolio is spread across US, UK, Russia and other European countries, besides India. SUN Group, which has interests in oil & gas, mining, real estate, infrastructure, food & beverage and technology, has been active in India, Russia and other emerging markets. The SPV will develop a 200-acre township in Jaipur and a 15-acre high-end housing project in Noida. Both projects are likely to be completed in two-and-a-half years. The Jaipur Township will have housing, retail, commercial and IT space. Amrapali group, which has developed six urban residential colonies in the national capital region, is at present executing real estate projects worth Rs 8,000 crore in several cities. The SUN-Apollo fund infusion is the latest in the series of PE funding in the Indian real estate despite a slowdown. Many PE funds had raised funds when the going was good for the realty sector as well as the financial markets. SUN-Apollo had closed a $630-million fund last year. Therefore, the PE infusions in Indian realty are mostly the deployment of funds raised earlier. But now with credit crisis gripping the globe, fund raising has considerably slowed. Meanwhile, demand has slowed down and bank credit is largely unavailable to realty firms, forcing them to seek cash from PE players at a not so favorable term. Real estate players are said to be settling for a project valuation of 30-40% less than what they could have got a year ago. Cash crunch has forced several real estate players to focus on executing existing projects, rather than expand into new areas. Some, however, are still exploring new themes. Amrapali group is foraying into hospitality with a 230-room hotel in Greater Noida.