Here is good news for real estate developers engaged in developing residential projects for the lower and middle income segments of the population. Capri Global Capital, an NBFC, has real estate financing as one of its two focus areas. The company describes this business as wholesale lending segment and has disbursed loan worth around `1250 crore till now.
Known earlier as Money Matters Financial Services Limited, which handled loan syndication and related business, it entered into a strategic tie-up following the alignment with Capri Capital Partners’ international real estate investments affiliate Capri Global Capital in July 2013. “Until 2011 the company had been offering financial solutions and services with emphasis on debt advisory services and has executed transactions close to `50,000 crore. In October 2010, the company completed a Qualified Institutional Placement (QIP) and raised `445 crore when it decided to get into asset financing and lending business. Today, Capri Global Capital operates in two verticals – funding residential developments and SME lending, which is a priority sector lending,” says Sunil Kapoor, executive director of the company.
He reveals that in real estate funding, the company extends finance to mid-tier developers, who undertake residential developments focused on the mid income segment. “The funding offered is cash flow backed and is typically in the form of a term loan,” says Kapoor.
Capri Global Capital has so far funded projects in Mumbai, Pune, the National Capital Region, Bangalore and Chennai.
Kapoor mentions a distinguishing feature about the company: it is a zero debt and zero delinquency company and its portfolios have no non-performing assets. “The asset class we are funding within the real estate space, namely residential developments, is not speculative. We also ensure in doing transactions in this sector that even in the event of downturn in the markets, there is adequate capital protection. The payment cycles are so structured that the disbursement depends wholly on the cashflow. In our case there is no delinquency in this sector,” he adds.
“In the wholesale lending space,” says Kapoor, “we are targeting a very niche segment – mid-sized builders who help to meet the aspirations of the lower and middle class population. There is tremendous requirement of dwelling spaces in this segment and in fact there is acute shortage. We hope to meet a social cause as well by financing developers focused on the mid and lower income segments, especially so given the tight liquidity situation for the sector and limited funding options available from traditional sources such as banks “
The company assesses the developers in this segment based on their credit histor, their past history in delivering quality residential apartments, assessment of the project location and financials and the quality of security offered. The funding may be in 1 or more tranches linked to the stage of development and based on discussions and agreement with the developers.
How does he see the potential of the sector in the six metros of the country? It is often mentioned that the sector is hugely overvalued at least in Mumbai and may face a correction? Do you really think so?
“The metros have huge potential,” says Kapoor. “There is tremendous demand for dwellings in all the metros. However, I will look at Mumbai from a different perspective. True, the prices in Mumbai are remarkably higher compared to the other metros. This is mainly because of the shortage of land in the island city. And at the same time, the burgeoning population needs houses to stay. There could be short-term corrections possible in the city market, but on a long term basis, I do not see any scope for decreased price levels. The market will always bounce back.”
How does the company develop the much needed insight into the sector?
Capri Global Capital is an avid watcher of both the real estate and SME streams, says Kapoor. It has in-house research teams and their periodic reports provide all the background to take informed decisions. In fact, the company is bringing out a publication in the real estate sector, which aslo helps it to understand the sector better.
“Our effort at the moment is to build a real critical mass in the two segments we are focused on. We want to make a difference here in the way funds are made available, in the way enterprises are helped not just with funds but in terms of knowhow. We wish to stand out in our dealings with the customers. When we say we have facilitated business transactions with an aggregate value of `50,000 crore across varied products, we have gained extensive domain knowledge and understanding of the market. We wish to leverage this in undertaking value based business transactions,” says Kapoor.
In the SME segment, the company funds small businesses ensuring that the investment is made in assets that are productive. It provides financial solutions for the sector along with solutions for emerging business areas. “We insist that we partner with the customers at every stage of the business evolution. Our offerings are custom-made as per the business requirements, market conditions and the size of the business. Normally the offers include term loans for funding equipment and machinery purchases and secured short term working capital loans. Our teams assist the entrepreneur in defining his exact requirements and tailor the loan products accordingly,” says he.
Kapoor hastens to say that the funding the company provides to the SME sector is in fact priority sector lending although as a NBFC, the company is not mandatorily required to offer priority sector lending. Within one year of operation, the SME Lending business of our Company has a loan book of around `200 crore as on 31 December 2013, in the SME segment.”