Piramal to offer lease rental discounting to developers

Offers higher loan to value, flexi repayment

Piramal Fund Management (PFM), the financial services arm of Ajay Piramal Group, is getting into territory of banks.

After launching credit lines to developers like banks, on Tuesday the group said it will offer flexi lease rental discounting, popularly known as LRD, for developers of completed commercial properties.

PFM has already identified an initial pipeline of transactions worth Rs 1,500 crore and intends to scale up to a book size of Rs 10,000 crore by FY18.

Normally, banks offer LRD to developers of commercial properties wherein the banks discount developers’ rent receivables and lend them money.

“We have done lending to developers of commercial properties and LRDs are the next logical step,” said Khushru Jijina, managing director, Piramal Fund Management.

 

“We do construction finance for five to 5-6 and LRD for 9 to 12 years. So we engage with developers for 15 - 17 years,” he said.

Jijina said compared to banks, PFM would assign higher value to the assets and provide flexibility for repayment of principal and interest.

“Our loan to value ratio would be 75 per cent wherein banks give up to 65 per cent. However we will do LRDs at 10 to 11 per cent, compared to 9 to 9.5 per cent done by banks,” he said.

“Owners of completed assets will therefore, be able to approach PFM to raise significantly more flexible financing than they would otherwise be able to source from a bank,” Jijina said.

He added: “By introducing this innovative form of Flexi LRD, we are targeting owners and holders of marquee assets and offering them a form of finance that is both competitive and flexible whilst also enabling them to raise more money against the same asset when compared with traditional forms of LRD.”

In February this year, it said it will offer credit lines worth Rs 15,000 crore to developers and already sanctioned 50 per cent of the amount. Developers such as Wadhwa group, Subhod Runwal and others have availed this facility. Piramal is the most aggressive lenders in real estate space and did deals worth over Rs 11,000 crore so far this year.

Piramal has a joint venture with Canada’s CPPIB to provide debt to developers and is in talks with Pension and sovereign fund to forge a joint venture to provide equity capital to developers. In the recent times, it has stayed away from launching third party funds to focus on its prop book led deals and joint ventures.