The former Mphasis founder speaks to CNBC-TV18's Vineetha Athrey exclusively about his new venture; Value and Budget Housing Corporation (VBHC) and how it is attracting big ticket investors like the World Bank.
Also read: RBI policy big letdown for realty sector: MCHI-CREDAI
Betting on affordable housing
Affordable housing is still to pick up in India but that has not stopped Jerry Rao's venture Value & Budget Housing Corporation (VBHC) from attracting investors.
According to Rao, the World Bank-backed International Finance Corporation (IFC) is coming on board and will invest Rs 60 crore as equity which translates to a 12 percent stake.
With HDFC , Caspian and Carlyle having invested Rs 120 crore for a 36 percent stake in the company, the corporation already has big name on its board. At their end, the promoters hold around 36 percent.
"The purpose is to strengthen capital base of the parent company and use it for individual project jd or purchase of land", says Jerry Rao, chairman, VBHC.
With annual revenues of a Rs 100 crore, VBHC offers homes in the Rs 15-25 lakh range and has six ongoing projects across Bangalore, Mumbai, Chennai and Delhi.
VBHC's plans
The company is looking to launch six to eight new projects this fiscal. It is also eyeing new markets such as Gujarat, Greater Mumbai and Rajasthan.
In addition to IFC, it is in talks with other financial institutions to raise Rs 30-40crore at the special purpose vehicle (SPV) levels for these projects.
"We raise anywhere between 20 and 70 percent of the equity component of the project. There are institutions, funds and wealthy individuals who are willing to invest with us", says Rao.
Affordable homes, a good bet?
But the way forward may not be all-smooth. The fact is, affordable housing has not really taken off in India on a very strong note
Surging raw material costs, especially those of cement and steel, might throw more spanners in Rao's wheel. To counter this, Rao admits he has no choice but to raise prices by three to five percent across the board on a quarterly basis; a move that might not go down very well with its price sensitive clientele.
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