Forbes India 15th Anniversary Special

Piramal Enterprises, Ivanhoé Cambridge in tie-up to invest in residential development projects

Ivanhoé pumps in $250 mln into venture; investments focussed on projects across top metros

Salil Panchal
Published: Feb 23, 2017 05:10:27 PM IST
Updated: Feb 23, 2017 05:16:27 PM IST

Piramal Enterprises, Ivanhoé Cambridge in tie-up to invest in residential development projects
Image: (for illustrative purposes only)

Piramal Enterprises Limited (PEL) on Thursday announced a strategic partnership with Ivanhoé Cambridge, the real estate subsidiary of Canadian pension fund Caisse de depot et placement du Quebec (CDPQ) to provide long-term equity capital to blue-chip residential developers across India’s five major metros.

Ivanhoé Cambridge will be investing $250 million (approximately Rs 1,670 crore) for this purpose. PEL will commit an additional amount and co-invest between 25 percent and 50 percent of each transaction. The investment focus will be centred on the Mumbai Metropolitan Region, Delhi (NCR), Bengaluru, Pune and Chennai, a press statement said.

Ajay Piramal, chairman of the Piramal group and the Shriram group, explained the scenario under which the partnership with Ivanhoé came through. ”With the Real Estate (Regulation and Development) Act (RERA) and demonetisation taking effect, there will be a segregation of real estate developers. The A and B class developers are expected to fare better, but the C and D class developers will become marginalised across India.”

“The value of undeveloped land will come down and the top developers will have a greater supply of land in coming years. In this scenario, these developers will need strong funding, which this partnership will seek to provide,” Piramal told Forbes India.

PEL has a loan book of Rs 22,000 crore size in the real estate space, through its lending activity. The financial services arm provides all types of capital, ranging from construction activity to structured debt, lease rental discounting, apartment funds and recently, consumer housing finance.

Piramal said talks with Cambridge started more than 12 months ago, where “they looked at our projects and the work we had done.”

Piramal admitted that demand for property remains subdued. “But it is a question of time. Demand for good quality and also affordable housing will continue to grow. I agree that the days of the Rs 50 crore and above kind of flats have gone, but there will be demand for quality products.”

The capital will be deployed for a period of seven to ten years, officials said.

Piramal declined to comment on the expected return on equity from these venture or even the real estate developers they had reached out to.

Canada’s pension fund CDPQ has been eyeing India for years. It invests globally in major financial markets, private equity, infrastructure and real estate. Besides India, CDPQ is present in Montréal, Québec city, New York, Washington, Mexico City, Paris, Singapore, Sydney and Beijing.

In the real estate space, the Piramal Group has tie-ups with Warburg Pincus, Goldman Sachs, CDPQ, Bain Capital Credit and Canada Pension Plan Investment Board (CPPIB).