NORTH AMERICA – The Canada Pension Plan Investment Board (CPPIB) has made its first residential investment in India.
This was done through CPPIB Credit Investments, a wholly owned subsidiary of the pension fund.
CPPIB made the investment as part of a strategic alliance with Piramal Enterprises, one of India’s largest diversified companies.
The venture calls for each company to initially invest $250m (€183m) of capital that will provide rupee debt financing to residential projects across India’s major urban centres.
The focus of this capital will be on multi-family projects.
Graeme Eadie, senior vice-president and head of real estate investments at CPPIB, said:
“This opportunity allows us to participate in India’s burgeoning middle-class residential sector, which has demonstrated compelling fundamentals through population and income growth and rapid urbanisation.
“We are pleased to be fully aligned with an experienced operator with a strong track record.”
CPPIB believes there are many factors creating demand for new apartment projects in India.
Wenzel Hoberg, managing director and head of real estate investments for Europe at CPPIB, said: “These factors include increasing income levels, expansion of the middle class, rapid urbanisation, a trend towards home ownership and increasing household formations as a result of average household sizes decreasing as few family members share the same household.”
The capital supplied by CPPIB and Piramal will not be construction debt, they said.
“Bank financing is widely available for the construction phase of residential projects,” Hoberg said.
“The debt targeted in this initiative will be to cover early financial commitments by developers such as land acquisition.
“All loans will be collateralised by about two times the loan amount.”
The markets targeted for this capital will be Mumbai, Delhi NCR, Bangalore, Pune and Chennai.
The individual loans will range between $20m and $50m, with an expected loan return of 18-22%.