Vaishnavi Infrastructures Secures $25 Million Investment from Actis
Bangalore-based real estate developer Vaishnavi Infrastructures has received a $25 million investment from private equity investor Actis. The investment will be used for their Rs 350 crore project in Bangalore, according to an investment bank official.
Project Details
The funds will be allocated towards the construction and development of approximately 925,000 square feet of high-end residential and retail space in Yeshwantpur, a suburb of Bangalore.
This investment represents the first venture for the Actis India Real Estate Fund, a $300 million fund backed by Actis.
Strategic Location and Market Conditions
"Actis has taken a significant minority stake in Vaishnavi’s Bangalore project as it is situated at the perfect location. With current realty market conditions private equity players prefer to invest in projects as they can get the right valuations," stated T R Srinivas, director at o3 Capital, from his Bangalore office.
Srinivas further indicated that Vaishnavi intends to pursue "the debt route" for additional funding, rather than divesting further stake in the project.
Challenges and Funding Strategies in the Real Estate Market
The current real estate market presents a number of difficulties which make it harder for realtors to secure debt financing from traditional banking institutions. Industry experts suggest that many developers are currently facing interest rates of approximately 30% on new loans.
To navigate these difficulties, real estate developers are actively seeking private equity investors as a means to sell stakes in their development endeavors. This strategy is increasingly being used in lieu of taking on unsustainable debt from traditional banks.
Other Developers' Funding Approaches
- Recently, New Delhi-based Unitech announced its intention to sell a 50% stake in the initial phase of its Mumbai project (near Bandra-Kurla complex) to Lehman Brothers for $175 million.
- In contrast, another Delhi-based developer, Parsvnath Developers, stated that it currently does not face any liquidity challenges for its ongoing project.
"I have Rs 300 crore in fixed deposits and over Rs 500 crore is unutilised and sanctioned debts available with us. I do not see any liquidity issues and am in a comfortable position," stated Parsvnath’s chairman, Pradeep Jain. He added that Parsvnath's average cost of funding is currently around 12%.