Global distressed funds go big on Indian realty

Global distressed funds go big on Indian realty

Team Opulnz Abode – 26th May 2023 10:00am – Read time: 2 mins

In a recent development, Varde Partners, a renowned global investment firm, has acquired a 15% stake in Reliance Power, a subsidiary of the Anil Ambani ADAG Group, for Rs 933 crore. This follows Varde’s earlier infusion of approximately Rs 550 crore into Reliance Infrastructure. Varde Partners has been actively investing in India, with over $3 billion deployed in the country across 20 different transactions in the past four years.

Founded in 1993, Varde Partners has a vast investment portfolio exceeding $95 billion, spanning regions such as North America, Europe, and the Asia Pacific. Despite attempts to reach out for comment, Varde Partners did not respond to an email seeking clarification on the matter.

According to Vishal Srivastava, Executive Director at Anarock Capital, these funds are opportunistic credit funds that have been awaiting the implementation and maturity of the Insolvency and Bankruptcy Code (IBC) in India. The occurrence of the IL&FS issue and demonetization created additional opportunities for these funds to invest. The IBC, introduced in 2016, establishes a time-bound process for resolving insolvency cases, giving creditors control over the debtor’s assets and allowing them to initiate recovery proceedings.

Srivastava further explained that some of these distressed asset deals involved loans that had turned into non-performing assets (NPAs), causing challenges for developers and bankers. The solutions provided by distressed asset investors require adequate compensation due to the complex nature of these transactions. Typically, special situation/distressed investors charge interest rates ranging from 20% to 22%.

A managing director of a private equity fund highlighted that when traditional non-banking financial companies (NBFCs) slowed down their lending activities to clean up their balance sheets, distressed funds seized the opportunity to provide loans. The credit situation in the real estate sector was further exacerbated by the pandemic, creating additional avenues for global funds to invest in distressed assets.

The involvement of Varde Partners and other distressed asset investors signifies the evolving landscape of investment opportunities in India, driven by factors such as the implementation of the IBC, market conditions, and the need for liquidity in the real estate sector.

In a collaboration earlier this year, Varde Partners joined forces with Shapoorji Pallonji Real Estate, Indiabulls Housing Finance, and Lokhandwala Kataria Constructions to revive the financially strained Minerva luxury project located in South Mumbai. In 2020, Varde Partners provided a loan of Rs 750 crore to Shapoorji Pallonji Real Estate.

Furthermore, last year, PAG (Pacific Alliance Group), a firm associated with Varde Partners, extended a loan of Rs 900 crore to the Elan Group for the purpose of acquisition and growth. PAG manages capital for nearly 300 institutional fund investors and has assets under management exceeding $50 billion. These collaborations and investments highlight Varde Partners’ active involvement in revitalizing distressed projects and supporting growth initiatives in the real estate sector.

Oaktree Capital, a US-based investment group with assets totaling $172 billion, has been actively involved in real estate deals. Recently, it made headlines for a deal worth ₹5,000 crore with Indiabulls Housing Finance, wherein it took over developer loans extended by the housing finance company. This is not the first time Oaktree has engaged in such a deal with Indiabulls.

Oaktree has also been involved in several transactions with property developers. In 2021, it invested ₹425 crore in a luxury residential project called 25 South, located in central Mumbai. The project is owned by property developer Hubtown and private equity firm Rising Straits Capital. Prior to that, Oaktree provided ₹570 crore to Gurugram-based developer M3M India through non-convertible debentures issued in two tranches. Oaktree has declined to comment on these deals.

Varde Partners, another US-based firm, is also making significant investments in the Indian real estate sector. In late 2022, Sandeep Chandak, Managing Director of Varde Partners, stated that the firm intends to invest $800 million to $1 billion across six to eight deals. Last year, Varde Partners provided ₹440 crore to Omaxe and ₹400 crore to Chennai-based Casagrand for the acquisition of land parcels.

These investments highlight the active interest and substantial commitments made by Oaktree Capital and Varde Partners in the Indian real estate market.

Opulnz Abode

Opulnz Abode, a luxury and investment real estate consultant, welcomes the entry of global funds into the Indian real estate market. This development is seen as positive news for the industry. The participation of global funds signifies their confidence in the growth potential and investment opportunities offered by the Indian real estate sector.

Opulnz Abode acknowledges that global funds bring valuable expertise, experience, and financial resources that can contribute to the development and revitalization of the real estate market in India. Their presence can help attract more investments, stimulate economic activity, and create employment opportunities in the sector.

As a luxury and investment real estate consultant, Opulnz Abode is well-positioned to assist global funds in identifying high-quality luxury projects and lucrative investment opportunities in the Indian market. The consultancy understands the specific requirements and preferences of luxury buyers and investors, and can provide tailored advice and guidance to maximize their returns and achieve their objectives.

Opulnz Abode believes that the involvement of global funds will further enhance the overall competitiveness, transparency, and professionalism of the Indian real estate market. It anticipates that their participation will lead to the development of world-class luxury properties and infrastructure, elevating the standards of the industry and offering discerning buyers and investors a wide range of attractive options.

Overall, Opulnz Abode views the entry of global funds as a positive development that will contribute to the growth and transformation of the Indian real estate market, and looks forward to working closely with these funds to deliver exceptional real estate solutions to its clients.