A unit of the New York-based private equity firm Warburg Pincus will invest $284 million for a minority stake in Piramal Realty, the real estate development arm of $5 billion-in-value Piramal Group, the Mumbai-based business conglomerate owned by billionaire Ajay Piramal. The group’s interests span pharma, financial services and glass manufacturing.
It is the largest investment in India’s real estate sector and amongst a series of by other PE firms like Blackstone, indicating that private equity firms are optimistic about the medium to long-term potential of the sector. Blackstone has invested in billionaire Jitendra Virwani’s Bangalore-based Embassy Property Developments and Pune’s Panchshil Realty.
Piramal Realty owns over 10 million square feet of land in prime areas like BKC, Worli and Byculla of India’s financial capital, Mumbai.
“If India is to be the world’s second or third-largest economy in our lifetime, the moment is ripe to create a market leader in real estate where there is none, and Warburg Pincus sees that,” said Anand Piramal, 30, executive director of the Piramal Group and son of Ajay Piramal. Unlike other PE deals in the sector which invest in Special Purpose Vehicles set up for specific projects, Warburg Pincus has invested at the entity level.
India’s real estate sector is going through a multi-year slowdown because of a lack of clear policy, delayed government clearances, non-availability of funds and slowed demand – especially for residential properties.
But Anand Piramal said he views this as an opportunity. “Real estate has been through a difficult time, the market is soft and it is a great time to buy assets for players like us who have the holding power.” He said the sector is at the bottom of the cycle and trending upward from here on. “The government is making it simpler to get approvals and there is no corruption,” he said in a phone chat.
CEO Mike Holland of Embassy Office Parks said his company is seeing a health level of interest from domestic and international private equity investors. “This is a reflection of the positive sentiment towards the medium term in India as a whole,” he said.
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