Luxury villa projects get funds

Bangalore: Luxury villa projects are attracting investments from private-equity (PE) funds and non-banking financial institutions (NBFCs) as real estate firms slowly step out of their comfort zone of building fast-selling residential apartments.

While investments in the residential space continue to remain a sweet spot for funds and NBFCs alike, the investors are also exploring the emerging option of funding particularly large villa projects.

In a new transaction, Reliance Capital Ltd funded Rs.60 crore in an ongoing villa project of Skylark Mansions Pvt. Ltd in Bangalore suburb Whitefield.

Azure Capital Advisors Pvt. Ltd along with a co-investor recently invested in a 20-acre land that will have 200 villas in Sarjapur Road, Bangalore, being developed by Azven Realty Pvt. Ltd. Villa development became a thing of the past after the 2008-09 slowdown and most developers resorted to smaller residential projects with preferably mid-priced apartments.

This year, however, has seen a slew of villa launches in southern Indian cities such as Bangalore and Chennai, indicating a comeback of sorts for this real estate product.

Rajeev Bairathi, director, DTZ International Property Advisors, said villa projects are typically self-funded by real estate companies. “But if developers are looking to expand the land parcel and acquire additional land to the project, then they would need capital.”

The villa projects coming up now begin at the price of a high-end apartment, Rs.80 lakh to Rs.1 crore, and can go upward of Rs.10 crore. Bangalore’s Skylark Mansions is developing 114 villas priced at Rs.2-5 crore each.

“We raised the money for project construction. We have four ongoing projects, of which two are villas, though apartments are fast-moving products compared to villas,” said chief executive P.S. Suresh.

Shailesh Ghorpade, managing director and chief executive, Azure Capital, said their project is priced at around Rs.1-1.75 crore a villa and is targeted at actual users in a captive market that has many large campuses of information technology companies nearby. In another recent transaction, ASK Property Investment Advisors invested about Rs.100 crore to help Shriram Properties Ltd buy land.

The Bangalore project coming up on around 16 acres of land in Sarjapur Road has a large villa component along with apartments. Sunil Rohokale, group chief executive, ASK Group, said villa projects offer a great opportunity to PE funds because the cash flow generation is very strong in these. “We would be happy to look at more such villa projects,” said Rohokale.

Chennai-based realty firm Casa Grande Pvt. Ltd has shifted focus to developing villas in the past two years and has a pipeline of 2,000-3,000 villas.

On Tuesday, the company launched an 18-acre project, Casa Grande Pavillion, with 350 villas in three formats: independent luxury villas at around Rs.1 crore, twin villas at Rs.80 lakh and row houses at Rs.55 lakh.

“We are looking to raise PE money for new land acquisitions, which will have villas and apartments,” said Arun Kumar, founder and managing director, Casa Grande. PE funds have invested around $262.25 million (around Rs.1,439 crore today) in residential projects so far this year, compared to $247.24 million in all of 2011, according to VCCEdge, a research platform.