* Piramal, CPPIB to invest $250 mln each
* Fund to focus on rupee debt financing for residential
* Have identified projects for lending, to announce by March
(Adds details, comments, background)
By Swati Pandey
MUMBAI, Feb 12 India's Piramal Enterprises Ltd
said it will join with Canada Pension Plan Investment
Board (CPPIB) to set up a $500 million fund to finance
residential property projects in India.
The deal highlights growing interest by global funds in
India's real estate sector on the back of a persistent housing
Long-term demographic changes - urbanisation, rising incomes
and more nuclear families - are transforming how and where
people live in Asia's third-biggest economy.
Singapore's GIC Pte Ltd, Temasek Holdings
and Oman's State General Reserve Fund last year agreed to invest
$200 million in a sector fund by Indian mortgage lender HDFC Ltd
, while Qatar Investment Authority is also said to be
in talks to invest a similar amount in residential property.
Piramal and the Canadian public pension fund will invest
equally in the venture, which will focus on providing
project-level debt to local developers in Mumbai, New Delhi,
Bangalore, Pune and Chennai, the Indian company said.
The partners have already identified projects for lending
under the venture, and an announcement will be made by March,
Khushru Jijina, a group executive, told reporters.
The average rate for lending under the alliance is expected
to be 20 percent, he added.
Weak equity markets in a slowing economy and restrictions on
lending by banks to the sector are pushing India's real estate
developers to find other modes of financing.
"This is an opportune time to be creating an aligned pool of
capital to target what we believe to be very compelling
financing opportunities in the real estate sector," Ajay
Piramal, chairman of the Indian company, said.
The diversified Piramal group launched its financial arm in
2011 with a focus on the real estate sector and already operates
a real estate-focused private equity arm, which manages about 43
billion rupees ($691 million) across several funds.
Piramal has been diversifying after it sold its India drugs
business to U.S.-based Abbott Laboratories for $3.72 billion in
2010 and its diagnostic services unit to Super Religare Labs for
about $132.6 million.
It owns an 11 percent stake in Vodafone India Ltd, the
country's second-biggest phone carrier, and is also rumoured to
be interested in picking a stake in Shriram Capital, among the
26 companies to apply for a new bank licence with the Reserve
Bank of India.
Last year, CPPIB made its first foray into India's property
market after investing $200 million in a real estate joint
venture with India's Shapoorji Pallonji Group.
($1 = 62.27 rupees)
(Writing by Prashant Mehra; Editing by Kim Coghill)