Bengaluru: Piramal Finance Pvt. Ltd, which houses the entire financial services business of the Piramal Group, has lent Rs450 crore to a joint venture between Bengaluru-based developer Embassy Group and Hyderabad’s Phoenix Group, which is developing three special economic zones (SEZs) in Hyderabad, company executives said.

The money has been given in the form of construction finance to procure approvals and develop the SEZs, which will be built across 10 million sq. ft.

In the joint venture, Phoenix Embassy Tech Zone Pvt. Ltd, Embassy is an equity partner while Phoenix provides the land. Both are involved in project construction.

With this transaction, Piramal Finance has committed more than Rs2,000 crore in the last two years or so in Hyderabad, of which Rs1,000 crore has been committed to the Phoenix Group.

“Hyderabad has advantages of having one of the best infrastructure amongst cities and a proactive government," said Khushru Jijina, managing director at Piramal Finance.

“We started investing in Hyderabad in 2014, at a time when most other banks or NBFCs (non-banking financial companies) perceived Hyderabad negatively for investments, considering its history of political uncertainty and weak real estate sector for a prolonged period," said Jijina.

“Given faster approval process, infrastructure and growth potential, especially in the commercial office space, we are positive and intend to commit an additional Rs2,000-3,000 crore in Hyderabad in the coming year," he added.

Jijina said that the Phoenix Group is a preferred partner in the city and a market leader in the commercial real estate space, having delivered more than six million sq. ft of office space.

The Phoenix Group has a large portfolio of commercial office projects, with nearly 23 million sq. ft of space under construction. The firm has attracted substantial private equity and NBFC capital this year, having raised capital from Altico Capital India Pvt. Ltd, the non-banking finance arm of Asia-focused investor Clearwater Capital Partners LLC, as well as from Motilal Oswal Real Estate. Altico invested Rs309 crore and Motilal invested Rs90 crore

“We have got Rs450 crore from Piramal for the three SEZs and depending on how the projects perform, additional funds may be infused into the projects. The Telengana SEZ policy is more conducive compared to other states and there is a lot of interest from occupiers like software companies to take up space as a result of which the overall office market is looking very positive," said Gopikrishna Patibanda, managing director of Phoenix Group.

Embassy Group chairman Jitu Virwani confirmed the transaction.

A 14 April note from CBRE South Asia Pvt. Ltd said Hyderabad witnessed strong office leasing in 2016, registering 109% year-on-year growth. In the January-March 2017 period, the city witnessed uptake of more than 1.3 million sq. ft of office space.

“Availability of talent, good infrastructure and the proactive nature of the government have led to companies looking at Hyderabad to set up offices and many Bengaluru-based developers are diversifying and looking at the city for new projects," said Ritesh Sachdev, managing director (south) at property advisory Cushman and Wakefield India.

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