Piramal prowls for distressed real estate assets

Billionaire Ajay Piramal’s son is seeking to take advantage of teetering Indian developers to expand his property business.

Piramal Realty, which counts Goldman Sachs Group Inc. and Warburg Pincus & Co. as minority investors, is looking to buy land from distressed developers and build a portfolio of commercial assets, Anand Piramal, the group’s executive director, said in an interview in Mumbai.

“In the next two years there will be lot of consolidation, and in each city the top four to five developers will survive and thrive,” the 34-year-old said. “Five or six years ago, most of the people that came to sell to us were land owners; now most of the opportunities are coming from developers. Developer-to-developer deals are happening because many of these people are stuck,” he said.

Investor confidence was rocked last year by a series of defaults at shadow lender IL&FS Group, which pushed up costs for borrowers, including builders looking to roll over debt that fueled a construction boom. Real estate firms have to pay about Rs 1.29 trillion ($18.7 billion) a year on outstanding debt but generate less than half that in income that can be used for repayments, according to an analysis of about 11,000 companies by research firm Liases Foras.

Strong Footing

Nonetheless, Piramal says this is also a good time to be raising capital to help buy assets that will come to market in the next couple of years. He is also looking for a partner to build a portfolio of commercial assets to diversify from being primarily a residential builder.

Piramal Realty seems to be on a strong footing amid the mess. Sales have quadrupled this year to Rs 30 billion, fueled by new projects in the south of Mumbai.

“In the short term, there are some hiccups in Indian real estate, but the trajectory in the long term in my view is as good as anywhere in the world,” Piramal said.

His 63-year-old father Ajay is worth $4.5 billion, according to the Bloomberg Billionaires Index. Most of his fortune derives from his 51 percent stake in Mumbai-based Piramal Enterprises, a publicly traded company that produces drugs and glass containers.

Anand was recently in the news when he married the daughter of Asia’s richest man, Mukesh Ambani, in a lavish wedding said to cost about $100 million, with a guest list that included Beyonce and Hillary Clinton.

In other highlights from the interview, Piramal said:

• The firm has eight projects, with about 80 percent residential and the rest commercial
• The developer has doubled its project pipeline to 25 million square feet over the past 18 months
• Luxury residential will sell if it’s priced and sized right, but ultra-luxury houses costing more than 100 million rupees might struggle
• He will also look at acquiring distressed unfinished residential projects that have government approval
• More land will become available in the next six to nine months as some distressed developers are forced into bankruptcy