Sunday, November 19, 2017

Interview - Rubi Arya (Milestone Capital Advisors Limited )

We are open to funding high rise requirements

Formed in 2007, the Mumbai based Milestone Capital Advisors is a privately held alternative investment advisory. The firm has raised funds of approximately Rs. 3000 crore and advises 8 schemes across real estate & bullion products.RUBI ARYA, VICE CHAIRMAN & DIRECTOR, Milestone Capital Advisors Limited offered SHRIKANT RAO a perspective of the funding available for tall buildings.

 

On current market trends in terms of financial support for high rise structures: Funding for high rise is available however the appraisal criteria take into consideration prior experience of executing such projects and timeline for completing the high rise building. In addition, promoter credit rating plays an important role in organising such financing. In Mumbai the development of highrise buildings – above 25-30 storeys – is primarily concentrated in the Island City and now moving to suburbs till Borivali. This is driven largely due to lack of adequate plot size that would allow higher ground coverage like in most re-development and slum rehab projects. Hence the highrise envisaged by a developer is not an "option" as against low rise but a "necessity" to consume the full potential of the plot. Many re-development and slum rehab projects are funded by organised investors such as us. The high rise projects need more financing since the payment is linked to progress of the construction slab wise and hence the overall time frame to receive 100 per cent payment is spread over a longer time frame.

 

On Milestone Capital’s own experience in funding high rise, high value, projects: Any high rise project has three crucial challenges as compared to low or midrise: a) Statutory hurdles b) Construction Technology and c) Construction Programming and Site Logistics. An average 20 -25 Storey Midrise building is more likely to be developed within the pre-planned time frame than a 35 to 45 storey highrise. This means that funding for such projects has to come with longer investment periods and with built-in buffers for time and costs overruns. Hence any investment needs to factor in such delays and make the right assumptions for project completion and sales collection/cash flow. If these are assessed adequately, the project is likely to generate returns for its investor and developer. Milestone does receive such proposals on continuous basis and is evaluating a few such proposals. Our focus is not limited to the Island City or Mumbai and we are having a steady pipeline of conventional projects too. If such high-profile projects have not "taken-off" then it is largely due to delays in statutory clearances than due to market rejection till now.

 

On the qualifications for high rise project funding and risks associated with lending: The major risks are same as the challenges listed above. Hence the correct entry point for us is where major statutory approvals are in place and construction is in progress at few storeys above plinth on the developer's component (Sale component). In addition, experience of key contractors and engineering advisors is critical to success of any such project.  At such a stage the project is "out of the woods" as far as principal approvals and Construction planning is concerned. However challenges on construction cost and time overruns remain till completion and past experience has shown that these risks are not fully factored in during the planning stage at times.

 

On high rise real estate developments Milestone has funded: Milestone is has funded a proposed re-development project at Shivaji Park which envisages a 54 Storey tower.

 

On the prospects of banks and NBFCs increasingly adding ‘high rise-high value’, projects to their lending portfolio: Banks and NBFCs are most likely to fund projects which have construction approvals and are being executed by developers with a track record and are strong financially. Most projects in Mumbai will be high rise and hence are likely to be funded by various financial institutions that are able to assess the project development risks.

 

On the role for Milestone in the high rise funding space with future cities looking to build tall: Milestone has always been at the forefront of innovation in financing strategies for real estate investment – we were the first ones to introduce private REIT’s and structured debt fund. We work closely with developers to meet their financing requirements and are open to funding high rise buildings, if we are comfortable with the project duration and execution capability of the team.




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