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Real Estate Loan

Real Estate Loan is extended by lenders to part finance the construction cost of Real Estate Projects.   

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Real Estate Loan covers 50% to 80% of the Project Cost with the balance met by the Company from their own sources.

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Real Estate Loan is secured by a charge on the Real Estate Project assets and is repaid from the cash flow generated from the Real Estate Project.

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Real Estate transactions are usually classified as either Real Estate Investment or Real Estate Development financing transactions.

 

1.Real Estate Investment:  

Company develops a property or purchases a property (or a group of properties) as an investment.

 

 2. Real Estate Development:

Company develops a property (or a group of properties) for sale.

 

 

Real Estate Investment Transactions:  

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Real estate Investment transactions involves finance for:

 

  1. Commercial real estate such as offices, shops, etc—to be repaid from the rent received from tenants (known as commercial real estate finance), or

  2. Blocks of residential real estate—to be repaid from the rent of individual residential units (known as residential real estate finance), or

  3. Mixed use real estate - to be repaid from the rent of individual residential units, offices, shops, etc

 

Real Estate Investment Transactions could be developed either in a Special Purpose Vehicle (SPV) i.e., SPV Structure or in the company i.e., Direct Structure.

 

SPV Structure

  • Parent company forms 100% owned subsidiary for the ownership of the Project.

  • SPV is formed to isolate/ring-fence the project from the Parent 

  • SPV is the owner of Project asset and is also the borrower of Project debt

  • Project assets are mortgaged to the Lenders along with 100% ownership in the SPV

  • The repayment of debt starts after project completion and is repaid from the rental income from tenants.

  • Project debt is long term say 10+ years with moratorium period equivalent to time for project completion

 

Direct Structure

  • Parent owns and undertakes the project and is the borrower

  • Project assets are mortgaged to the Lenders

  • The repayment of debt starts after project completion and is repaid from the rental income from tenants.

  • Project debt is long term say 10+ years with moratorium period equivalent to time for project completion

 

 

Real Estate Development Transactions:  

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Real Estate transactions for development purposes involves finance for:

 

Commercial real estate such as offices, shops, etc—to be repaid from the sale proceeds from buyers (known as commercial real estate finance), or

Blocks of residential real estate—to be repaid from the sale proceeds from buyers of individual residential units (known as residential real estate finance), or

Mixed use real estate - to be repaid from the sale proceeds from buyers of individual residential units, offices, shops, etc

​

Real Estate Investment Transactions could be developed either in a Special Purpose Vehicle (SPV) i.e., SPV Structure or in the company i.e., Direct Structure.

 

​

SPV Structure

  • Parent company forms 100% owned subsidiary for the ownership of the Project.

  • SPV is formed to isolate/ring-fence the project from the Parent 

  • SPV is the owner of Project asset and is also the borrower of Project debt

  • Project assets are mortgaged to the Lenders along with 100% ownership in the SPV

  • The repayment of debt is from sale proceeds of the units of the Project.

  • Project debt is medium term say 3 to 5 years & is structured based on milestone payments from buyers

 

Direct Structure

  • Parent owns and undertakes the project and is the borrower

  • Project assets are mortgaged to the Lenders

  • The repayment of debt is from sale proceeds of the units of the Project.

  • Project debt is medium term say 3 to 5 years & is structured based on milestone payments from buyers

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