Piramal Real Estate Fund aims for an extension of one year.

By Abhay Shah, Realty Quarter

The real estate investment trust (REIT) created by Piramal Fund Management said its tenure will be extended by one year, delaying exits, due to six projects worth about Rs 562 crore getting stuck. Scheme V of the Indiareit fund started in 2013 with a primary term of six-years, which can be extended by up to two further one-year periods. The primary tenure finishes on 31 July.

Piramal told investors in a letter that the first annual extension would be pursued. The company had invested in 10 projects. It is completely out of four and partly out of one. The six under-construction projects represent a total Rs 562 crore investment.

Piramal informed investors that the projects were impeded by delays in the purchase of land, slow government approvals, green trial orders, and demand-supply mismatch and bankruptcy proceedings.

The Fund said investors were kept instructed by the laws. “In accordance with standard corporate policy and governed by Sebi and in the spirit of transparency, Indiareit Fund V shared with all its investors the current status of residual investments.”

“During the duration of the extended period of the fund, the investment advisor will continue to manage the residual investment in their ultimate monetisation. Piramal Fund Management remains committed to improving the performance to create a longterm value among its shareholders.”

The liquidity crisis that has affected NBFCs has shaken the property industry and tested some major companies in India, causing a slowdown in credit collection and excess supply to exits. As a result of volatile market circumstances, the first private equity real estate fund of Aditya Birla Group was liquidated and collected Rs 1,056 crore in June. It transferred the funds to shareholders with Rs 601 crore by leaving four projects out of thirteen.

In a note to investors, fund managers observed that in July 2017 structural changes in the field of real estate’s such as the Real Estate (Regulation and Development) Act or RERA and the implementation of GST, while beneficial in the long run, had hit demand and absorption levels.

For housing finance companies (HFCs), it has been tough for the last eight months because they have the most asset-liability discrepancies with NBFCs. They tried to deal with the scenario through the reduction of the disbursements, the sale of assets and loans, and diversification of credit sources. In such a sector, funds were not in a position to ensure exits.