Big institutional funding witnessed in real estate projects in smaller cities

Real Estate conglomerates like Sushma Group, Bhumika Group and Omaxe having their presence mainly in tier 2 cities have recently been receiving big institutional funding and are in talks to raise more funds for the next phase of development in those locations.

Post Covid-19 many developers in tier-2 cities have received big funding which has led to a housing and commercial space boom in smaller cities, realtors and fund houses told ET.

Real Estate conglomerates like Sushma Group, Bhumika Group and Omaxe having their presence mainly in tier 2 cities have recently been receiving big institutional funding and are in talks to raise more funds for the next phase of development in those locations.

Varde Partners, a global alternative investment firm has recently paid up Rs. 440 crore to Delhi based Omaxe for expediting construction and delivery of its projects as well as investment into new projects.

Omaxe has majority of its projects running in tier 2 cities in different phases of construction and the company has strong presence in 27 different cities across eight states in the country: Uttar Pradesh, Madhya Pradesh, Punjab, Haryana, Uttarakhand, Rajasthan, Delhi, and Himachal Pradesh

“With the increase in internet penetration, adoption of technology and Covid-19, tier 2 cities are gradually increasing their contribution to the overall GDP and real estate, which is one of the largest contributors to GDP,” said Sharad Mittal, director and CEO of Motilal Oswal Real Estate (MORE). “While our focus will remain investing in tier 1 cities, we are also looking at investing in select tier 2 cities.”

The group, MORE made a ₹100-crore investment in Chandigarh in a residential project with Sushma Group, one of the largest developers in that market, in the quarter ended March. “We will continue to explore such opportunities in the future. However, we will remain cautious and selective,” Mittal said.

As a fund, MORE is primarily focused on investing in tier 1 cities in India. Till date, it has invested in over 100 projects and obtained close to 50 exits from tier-1 cities.

Bhumika Group, recently raised close to ₹100 crore between debt and two Lease Rental Discounting (LRD) transactions. It is working on constructing malls in Udaipur and Alwar. The group is also trying to raise another ₹200 crore in debt to fund construction of phase 2 of its 3.5 lakh sq. ft. retail space in Udaipur mall.

Uddhav Poddar, MD of Bhumika Group said, “We are now getting a better rate of interest and large funding institutions have shown interest in giving fund. Demand for organised retail has gone up and with more projects being expected, developers will need funding to sustain the momentum,”

According to a report by Savills India, private equity investment inflows into the Indian real estate sector stood at $1 billion during Q1 2022, almost five times the quantum recorded during Q4 2021.

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