BANGALORE: Provident Housing, the affordable homes unit of Bengaluru-based Puravankara Projects, is looking to generate funds from private equity firms to expand its presence in the segment.
"Raising private equity money will allow the builder to enter newer geographies and expand the portfolio," said a person having direct knowledge of the development. "The group does not want to invest in land but will now partner PE funds to buy land."
Provident Housing currently contributes 30% to the group's revenue, while 70% comes from the Purva brand that constructs middle-income and luxury homes. "The builder wants Provident to contribute 50% to the group's revenue over the next two years," said the person cited above.In its maiden fund-raising round, the Bengaluru-based realty firm got more than Rs 80 crore from ASK Property Investment Advisors to buy 31.96 acres in Poonamallee, Chennai. The acquisition cost of the land was Rs 110 crore.
"The group has divested 75% stake in Purva Good Earth to the fund that will house the Chennai property," said the person cited above. "The average selling price of the units would be in the range of Rs 4,500 per sq ft and the project is expected to generate revenue of Rs 1,500 crore," he said.
The Chennai project, with a developmental potential of 3.3 million sq ft, will be built in three phases and completed in an estimated five years.
Sunil Rohokale, managing director and CEO, ASK Group, and Jackbastian Nazareth, group CEO at Puravankara Projects, could not be reached for comment.
ASK Group manages real estate assets of Rs 3,000 crore domestically through its three funds and debt structures. The group has committed 100% of its first fund worth Rs 340 crore and has additionally committed Rs 800 crore out of the second fund of Rs1,000 crore.
Provident plans to enter bigger property markets including Mumbai, Pune and Hyderabad in the next two years. "The company is looking to be a pan-India developer of affordable housing and will launch over 10 million sq ft in these markets," said the person cited above.
In 2008, Puravankara Projects launched wholly owned subsidiary Provident to focus on affordable housing. The company has four major projects in Bengaluru and has also ventured into other markets such as Chennai, Coimbatore and Mangalore in the last six years. Out of seven ongoing projects, four are through joint development agreements with landlords.
Provident was among the first property developers to focus on affordable housing. In order to reduce construction costs, the company incorporated precast technology--panels or units are manufactured offsite and assembled at the location.
The Puravankara Group had gross debt of Rs 1,762 crore with a debt-equity ratio of 0.71 as of December 2014. It has 24.87 million sq ft under development. Of this, 8.24 million sq ft is contributed by the Provident brand.
According to the latest report by global real estate consultants Cushman & Wakefield, private equity investments in real estate more than doubled in 2014 to Rs 15,410 crore, indicating renewed interest among domestic and foreign investors in the Indian real estate sector.