In what would be the first major fund infusion into the Emaar MGF Group after a failed IPO, one of its promoters, Dubai-based Emaar is learnt to be investing $150 million to pick 20-25% stake each in three real estate projects of Emaar MGF.
This would be separate from its equity contribution in the JV firm Emaar MGF. Emaar holds 41% in Emaar MGF while the domestic JV partner MGF Group has 56%. The remaining equity stake is with private equity (PE) firms and other investors.
The Dubai-based group will pick equity in separate special purpose vehicles (SPVs) which will develop two retail and one office property in Gurgaon and Mohali. The injection of funds is particularly significant for the company, as it has come at a time when raising funds has become extremely difficult for real estate firms.
Debt has become very expensive and is largely unavailable. Emaar MGF, which withdrew its Rs 7,000-crore IPO in February after having failed to elicit investors’ response due to poor market sentiments, is looking at stitching 2-3 private equity deals in the coming months to fund its commercial projects.
Most realty firms have been looking forward to private equity players to fund their projects. However, PE firms too have turned cautious now and are driving hard bargains in the changed circumstances. Unitech too has recently obtained $175 million equity funding from Lehman Brothers’ real estate fund to develop a commercial property in Mumbai.
Slackening demand has multiplied real estate companies’ woes, restricting their cash flows. India’s central bank, battling a double-digit inflation, has hiked interest rates, prompting potential home buyers to defer their purchases. The signs of a slowing economy and expectations of a further fall in property rates have led corporate and retailers to postpone their space booking.
Emaar MGF, which is currently present in 26 cities, has a number of projects across residential, commercial, retail and hospitality sectors. It recently launched Boulder Hills residential project in Hyderabad and an integrated township in Mohali. The company is also executing the 27.7 acre commonwealth games village project in Delhi.
The company plans to develop over 200 hotels over the next 7-9 years. It has two equal joint ventures with Accor and Premier Inn for its hospitality ventures.
