Bengaluru-based design, architecture and construction company Total Environment raised Rs 300 crore in an equity investment from HDFC Capital.
The 20-year-old company specialises in building customised and furnished projects. With a team of over 600 members, the company focuses on construction with the use of natural-made products and a finished product which is environment-friendly.
The raised capital will be used to accelerate the delivery process of the current projects. Since 1996, the company has delivered 30 projects, and is currently completing four projects in Bengaluru and one in Pune. The firm also has a presence in Hyderabad and plans to foray into the Chennai market by 2017.
“This is a long-term investment and the investor will exit after a span of 78 months. The advantage here for the investor is that if the market does well, he gets higher returns but also shares the risk,” said Kamal Sagar, managing director of Total Environment Building Systems.
He added that the firm will have the added advantage that they do not have to pay interest on a monthly basis or lose capital at any point, which will help the company focus on the quality of the upcoming projects.
The investment has been infused into Total Environment Habitat Limited, which is a subsidiary of the parent company Total Environment Building Systems.
HDFC Capital had raised capital of Rs 2,700 crore from investors for a new equity fund HDFC Capital Affordable Real Estate Fund-1. The newly launched arm aims to take equity stakes in mid-income housing projects and also plans to look at buying fresh land with developers and building projects. This is the first investment made by the entity, which will be used in speeding up the delivery process of the projects in hand.
In its new projects, the Total Environment group is also venturing into smaller, more affordable homes, but with the quality and all the features of a typical Total Environment home. The company also plans to hire across verticals by the end of this year.
Overview of the real estate market
In the past few years, the real estate market has slowed down in terms of pace, which has raised speculations over the years. The builders have mostly raised structured debt, and equity transactions have not been a common phenomenon in the sector. With the lagging interest in the sector and the slowdown in cash flows, equity transactions might turn out to be the new paradigm in the segment.