Ackruti City Ltd. (“ACL”)

logo_ackruti


Country India
Sector Housing
Signing Date September 8th, 2010
Total Project Cost $90M
ICF Debt Pool Exposure $30M
IFI Exposure $30M
CELF III Exposure $10M

Project Description

Slum redevelopment scheme in which ACL, in partnership with slum dwellers (through a community led housing association), will resettle slum dwellers into high rise buildings on the slum site, freeing up land, which will be shared between the municipal/ state authorities and the commercial developer. The project consists of a large slum redevelopment project at Wadala, Mumbai, and several other smaller slum redevelopment projects.

The Deutsche Bank (DB) mandated financing included an upsize option of up to $50 million for one year following the first closing in Nov’ 2009. The ICP-DP subscribed to the upsize in order to enable faster redevelopment of the slum project when additional long term funds were diffcult to find in the market.

Financing Structure

The total loan amount is $90 million of which $30 million is from FMO, $10 million from Cordiant’s Emerging Loan Fund III, $15 million is from GuarantCo, $5M is from DB and $30 million from the ICF Debt Pool. The loan is structured as a convertible bond with a maturity of 5 years.

Infrastructure Component

The loan will finance $90M in infrastructure components (slum redevelopment). The redevelopment consists not only of social housing but also of roads, hospitals, water pipes and electrical connections.

Investment Rationale

 

  • Strong Project Rationale: Land is scarce in Mumbai. Redevelopment of slum land provides social benefits as well as expanding available housing. This land is relatively low cost but its acquisition must go through significant hurdles.
  • Experienced Shareholder/Sponsor: Ackruti City is a pioneer of slum redevelopment schemes, has a good reputation in the market, good relationship with government and has sound financials.
  • Solid Financial and Security Structure: Ackruti City is developing many projects; each financed on a project basis, and has relatively low leverage. The loan is secured by development rights valued at twice the loan amount. Ackruti City also guarantees the loan.

 

Development Impact

Residents in Mumbai’s slums have no secure tenor, let alone legal title on their de facto homes, and have no access to basic amenities like clean drinking water or sanitation. The proposed facility will result in an estimated 20,000-30,000 families being rehabilitated from slums into permanent, legal housing, which will include facilities like individual sanitation, sewage and running water in each flat. The rehabilitation will also improve the slum dwellers living conditions in terms of health, education and employment.

The project will result in creation of public spaces on the land cleared of slum dwellings. These public spaces will be used by the authorities for constructing public infrastructure like roads, parks, schools and medical facilities.

Additionality

Funds: No new funds were available for a $50m upsizing except for the ICP-DP subscription. ICP-DP funds will allow more slums to be redeveloped.
Demonstration Effect: The project is high profile and successful implementation will allow more extensive and faster development of many more slums.