Delhi-based real estate firm Emaar MGF Land Limited has raised private equity funding of Rs.250 crore from Kotak Realty Fund for its residential projects - Emerald Estate and Palm Terraces - in Gurgaon's extended golf course area.

Around 2.7 million sq. ft of residential space is being developed in these two projects and nearly 85% of this has been sold already, making Kotak's investment relatively risk-free. The projects is expected to be completed in around three years.

Emaar MGF is a joint venture between Indian lender MGF and Dubai's Emaar Properties, which is best known for its Burj Khalifa tower in Dubai, the world's tallest building. urrently, Emaar MGF which commenced operations in India in February 2005 has currently 36 projects under construction in India.

Transaction Reference: LiveMint

This year in April, Emaar had announced to launch a $770-million IPO within 90 days, a move that has been stymied by an indifferent stock market and slowing property sales after a sharp run in prices this year.

The second time, when it planned to raise funds after an 81% rally in stocks in 2009, investors shunned the sector due to what they perceived to be unreasonable valuations, given the supply glut and sharp jump in home prices that may be unsustainable. While another real estate player, DLF managed to raise funds at record valuations.

Moneycontrol and Bloomberg had reported that Emaar MGF will cut its IPO amount to about Rs 2,000 crore ($430 million), half the size it announced earlier this year. Economic Times had reported Emaar MGF is preparing a prospectus with plans to sell 10% for Rs.1,500 crore from the Rs 7,000 crore it aimed for in 2008. In 2008, Emaar MGF was forced to abandon its $1.5-billion IPO.

Real estate has underperformed the broader market, including DLF which is at Rs 317, down around 45% from an IPO price of Rs.525 a share in 2007. Oberoi Realty, Lodha Developers and BPTP are among the real estate companies waiting to list.

Emaar had outstanding loans of Rs.5,808 crore as on August 2009 and has to repay Rs.2,000 crore by March next year and hence is looking at different fund-raising options including selling non-core assets such as 9-10 proposed hotel properties.

Currently, the promoters (Shravan Gupta, MGF and Emaar Holding) of Emaar MGF hold 61.53% stake, while promoter group other than promoters hold another 33.78% stake. According to the draft red herring prospectus filed with SEBI dated on September 29, 2009, other investors including CVCI (1.28%) holds 4.69% stake. In 2008, CVCI had sold a 40% of its holding in Emaar MGF Land Ltd in a pre-IPO secondary deal. Hedge fund DE Shaw has bought 4.7 million shares from CVCI.

Kotak invested Rs.100 crore in Bangalore-based Adarsh Group's luxury project in February and is close to investing Rs.85 crore more in The 3c Co. It has invested Rs.50 crore in 2006 in The 3c Co.

Several developers are seeking PE funds because of delayed IPOs. In August, Lodha Developers Limited raised Rs.500 crore by selling a 10% stake to HDFC Venture Funds in its World One project in Mumbai. Developers such as Kumar Urban Development Ltd, which, too, has stalled its plan for a Rs.450 crore IPO, is in talks with PE funds for Rs.400-500 crore at the project level.

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