The Hindu Business Line : Pune builders, promoters launch realty fund

Pune, June 12The Promoters and Builders Association of Pune (PBAP) has announced the launch of realty fund, first of its kind in the country, PBAP Realty Investment Fund. Talking to presspersons, Mr Lalitkumar Jain, Chairman Kumar Builders and President of PBAP, said the PBAP Realty Fund has been created by investments from its own members.

The fund has been established to raise the standards of the industry by providing equity participation to developers of small projects that often get overlooked by other equity funds on account of scale and other eligibility criteria.

He said that this is also the first time that smaller developers would also have an opportunity to access equity fund. Mr Jain pointed out that no one currently offered equity funding to smaller developers.

He said that currently developers received funding from public markets or from private equity investors.

He said the domestic realty funds were more concerned about fund management costs etc and therefore were focussing on larger projects of large developers, with the result that smaller projects therefore did not find institutional equity participation.

And in case of FDI norms, this required a minimum of $ 5 million and land of 25 acres or minimum of 50,000 sq mt of built up area (over five lakh sq ft).

Mr Jain said the first series of the PBAP Realty Fund has a total corpus of Rs 26 crore and the first series has been fully subscribed by about 50 of the PBAP members.

The investments made by the fund would be based on a priority being given to the contributors to the fund, thereafter to the other members of the PBAP (about 250), he said.

The equity participation in projects would be approximately Rs 5 crore per project and about six projects would be funded from the first series.

About 84 builders have come in and said that the fund would be utilised for only greenfield projects.

Mr Jain said it would also be forming a private limited company, PBAP Realty Investment Fund and then form a separate special purpose vehicle (SPV) which would run the project under that SPV.

He said the second and third series would follow, which would invite funds to the trust and would be about Rs 200-300 crores. “In the next three years, we are looking at raising at least Rs 1,000 crore and then the other locations outside of Pune, which would include Maharashtra and Western India.”’

The PBAP Realty Investment Fund members are all on equal terms and one can invest up to 10 per cent.

But the maximum equity which has come in from individual is less than 10 per cent. He said the PBAP has created a separate screening committee which included chartered accountants, lawyers and architects who would look at the viability of the projects.

The investment committee would assess the financial feasibility of the projects under consideration and in case of conflict of interest between an individual investment committee member and the investee company, the member would move away from the committee and a fresh member would come in to give a fair decision.

He said the scrutiny of the project would take about a month’s time and the disbursement would also happen within one month.

He added that the fund would come into the new venture with an equity participation ranging from 26 to 50 per cent.

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