Private equity firm Red Fort Capital Advisors Pvt. Ltd has invested Rs. 150 crore in a residential project conceived by the 3C Company in Gurgaon, a suburb south of New Delhi, its latest offer of funding to the real estate developer.
3C, which is based in Noida, east of the Capital, plans to develop premium apartments priced between Rs. 50 lakh and Rs. 1.5 crore in the yet-to-be-named project on a 47.5 acre site in Gurgaon. The project is in the design stage.
The investment is Red Fort Capital’s fifth in a project undertaken by 3C, said Subhash Bedi, managing director of the private equity (PE) firm. He didn’t disclose total investment numbers. In its last investment, Red Fort had provided Rs. 200 crore of funding to 3C in early 2010 for a housing project in Noida.
Red Fort Capital has invested more than Rs. 500 crore in various projects by the developer, according to analyst estimates.
Property analysts say PE funds prefer multiple investments in a single company rather than scout for new developers to partner with. Funds such as Red Fort Capital have invested in one partner in a specific part of the country more than once. As with 3C and Parsvnath Developers Ltd in the National Capital Region (NCR) centred on the Capital, the fund has formed a partnership with Bangalore-based Prestige Estates Projects Pvt. Ltd.
Such partnerships offer the advantage of a sense of familiarity and comfort between the fund and the developer.
Second, the exhaustive process of due diligence before investment is reduced with a familiar partner and the time and money saved can then be spread across more transactions, said Ambar Maheshwari, managing director of corporate finance at property advisory Jones Lang LaSalle.
Vidur Bharadwaj, a director of 3C, said the firm currently has about 25-30 million sq. ft under development and will raise more capital on a project-specific basis.
With banks tightening lending norms, PE firms and non-banking financial companies (NBFCs) have emerged as an important source of funding for most real estate companies.
This year so far, about $69.87 million has been invested across three deals in residential projects by PE funds, according to VCCEdge, which tracks PE investments. Last year, PE funds invested about $409.59 million in 23 transactions across various residential projects.
Red Fort Capital has an estimated $1 billion under management in India, after it recently finished raising a $500 million real estate fund.
Bedi, however, declined to say whether the latest 3C investment is from the new fund or an earlier fund.
“The investment strategy for the new fund continues to focus on largely equity investments in primarily residential projects in large cities,” he said.
The fund made its first investment in Mumbai in November 2011, investing Rs. 250 crore in a slum redevelopment project by Omkar Realtors and Developers Pvt. Ltd.
Bedi added that the fund is currently negotiating two-three possible investment options in the city.
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