Sr. No.

28346

Reliance India Realty Opportunities LLP (Reliance Realty LLP)

a limited liability partnership for opportunities and growth in the real estate sector

LLP Memorandum

INDEX
Summary - Why Reliance Realty LLP now

Why Real Estate

Strategy and Approach

Reliance Realty LLP An Advantageous Proposition

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Summary Why Reliance Realty LLP Now

Now is the opportune time to invest in Real Estate on account of prevailing constraints in the banking sector, high interest rates, weakness in offtake , all causing stress to the Sector

Reliance Realty LLP has a differentiated approach / strategy with An emphasis on engaging in easy to execute, shorter gestation and lower risk real estate projects with a clear focus on exit opportunities Primary focus on residential segment in top 7 to 10 metros Seek to generate returns through quick deployment of funds Endeavor to provide safety of capital through multi layer security mechanisms

An innovative LLP structure , a first in India, leads to a tax efficient participation in the sector Adherence to highest standards of Governance, Transparency & Disclosure Provides a high degree of operational convenience Reliance Capital Asset Management Ltd - Portfolio Management Services (RCAM PMS)is the advisor to Reliance Realty LLP
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Why Real Estate

Real Estate sector accounts for approximately 5% of Indias GDP. The current size of the industry is close to USD 50 billion and the same is expected to reach a size of USD 180 billion by 2020*

The Real Estate sector is the second largest employer in the country, next to agriculture. The sector has backward and forward linkages with about 250 ancillary industries such as cement, brick, steel etc**

Real Estate is a play on India's growth story. The growth in the economy is reflected in need for houses, offices and places for leisure and recreation

Real Estate has few unique features which distinguish it from other asset classes: It is a real asset, which is produced and consumed domestically. Global developments only have an indirect impact through capital flows Real estate has historically shown robust and steady growth. Prices have also been fairly resilient relative to other asset classes The twin features of growth and stability, makes Real Estate a preferred investment avenue

*IBEF (Indian Brand Equity Foundation) report, April 2010. CREDIA (Confederation of Real Estate DevelopersAssociation of India), ideasfirst real estate report **http://ezinearticles.com/?The-Real-Estate-Sector&id=1631320 Confidential Slide 4

Right time to invest in Real Estate is Now

We believe that the next few months are an opportune time to invest in Real Estate for the following reasons Recent developments have caused tightening in the liquidity situation and thereby limiting the availability of funds to developers In select metros Many new projects which have been announced by developers require funding, as pre-sales have moderated due to higher prices Projects (specially commercial) have been stalled / going slow due to excess supply and non availability of timely and adequate funding Approvals for some projects are being delayed , thereby causing stress to the marginal developers Loans Restructured during the 1st half of 2008, are due for repayment in 2011

We are positive about the long term outlook of the Real Estate sector in India. The sector is driven by favourable demographics, rising income levels, growth of services and increasing urbanisation. The growth has been steady and sustained and we expect the same to continue in the future.

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Presenting

Reliance India Realty Opportunities LLP (Reliance Realty LLP)

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Reliance Realty LLP A Focused Approach

Reliance Realty LLP will adopt a focused approach wherein It would engage in easy to execute, shorter gestation, lower risk real estate projects, with clear focus on exit opportunities The primary focus shall be on residential segment in top 7 to 10 metros It would opportunistically look at brownfield commercial projects and generally avoid retail and hospitality segment It may selectively look at funding distressed assets It would typically participate in multiple projects, thereby reducing risk of single project exposure

With the above mentioned factors and focused approach, the projects are likely to be more liquid with a medium term horizon

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Reliance Realty LLP A Focused Approach

Partnering with developers having proven ability to execute the project, good track record and sound financial position Multi layer security mechanism in the form of charge on the underlying land, project receivables, additional collateral security, pledge of promoter share and corporate and promoter guarantee. Participation typically in deals which offer a preference in cash flow and returns. This will generally ensure recovery of capital and returns. Significant Veto rights vis--vis all key aspects of the transaction. Event of Default (EOD) clauses / take over rights, in case of a failure to deliver the project on timely basis. Deals would be typically structured with suitable exit covenants and understandings, and where feasible, at a pre agreed valuation.

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Our Approach
1. Location of the project 6. Exit Oriented Strategies 2. Choice of partners and developers to work with

Highly Focused Approach

5. On going Project Monitoring 4. Project Structuring, Due Diligence & Documentation

3. Project Economics, pricing and cash flows

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Our Approach - Location of the project

Macro Factors Cities with a significant underlying economic activity and migrant population, typically generate steady and sustained demand Cities with major thrust on infrastructure development

Micro-market analysis is absolutely critical to understand

Demand and supply in the immediate vicinity Access, connectivity, social infrastructure, etc City centric projects generally have shown the highest resilience, buoyancy and liquidity

The Business Process described above is intended to be illustrative of the process generally followed. There is no assurance that all or any of the steps mentioned above would be followed
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Our Approach - Partnering with appropriate Promoters and Developers

Avoid early stage funding, preferably deal with established real estate developers Partner with an experience of at least one business cycle, which would sensitise one to the business vagaries Prefer work with Developers who are dominant in a geography. This ensures a strong grip of the local market and market requirements. The pan India development model has not yet been particularly successful Ensure sufficient involvement of the developers; implementing too many projects at the same time stretches resources and dilutes interest Closely study the Number of on-going projects, financial track record and liquidity position of the developer Execution capabilities Experience with other financial institutions, investors and banks is an important indicator Track other commitments/liabilities of developers, on an ongoing basis

The Business Process described above is intended to be illustrative of the process generally followed. There is no assurance that all or any of the steps mentioned above would be followed
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Our Approach - Product Economics, Product, Pricing and Cash flows

Project should be self-sustaining and make sense on a stand alone basis Investment rationale to be based on project cash flows and not parental support

Right product at right price at the right location

Product pricing to be rational, based on micro-market analysis and product specification

Value for money propositions across asset classes witness sustainable demand

Entry price should be relatively low to provide sufficient cash margin

The Business Process described above is intended to be illustrative of the process generally followed. There is no assurance that all or any of the steps mentioned above would be followed
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Our Approach - Deal Structuring, Due Diligence and Documentation

Rigorous title, technical and financial due diligence is a must Ensure the developer has adequate skin in the game Alignment of Developers interest is imperative Multi layer security mechanism in the form of charge on the underlying land, project receivables, additional collateral security, pledge of promoter share and corporate and promoter guarantee against default Comfort on cost should be built into the project structure Preferred return project ensures preference of recovery of capital and returns SPV level deals can be efficiently controlled, relative to entry level deals Veto rights with Reliance Realty LLP on all key aspects of the transaction Liquidation priority in case of bankruptcy whilst retaining a return upside more attractive to that of conventional senior financing Event of Default (EOD) clauses / take over rights, in case of a failure to deliver on the project Tax efficiency to be built in both for the entity structures as well as the project structures

The Business Process described above is intended to be illustrative of the process generally followed. There is no assurance that all or any of the steps mentioned above would be followed
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Our Approach Monitoring & Exit

Project Monitoring
Periodic monitoring of the project on all agreed milestones (timelines, financial, etc.) Appointing independent Project Management Consultants (PMCs) to monitor and report on the project External auditors if required to monitor the project Exercise control to bring in the required course correction, if necessary

Exit oriented structures

Clear exit orientation built into the project at the project structuring stage Options and obligations to sell or buy the stake or the strategic interest at pre - agreed valuation Prefer self liquidating projects Project participation to be structured in such that, it may not need to await the conclusion of the project to effect exit Project participation structured in the manner so as to minimize dependence on financial markets for LLPs exit from the Projects

The Business Process described above is intended to be illustrative of the process generally followed. There is no assurance that all or any of the steps mentioned above would be followed
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Risk Mitigation & Diversification

Risk minimization is the key to deliver positive returns. Hence, Reliance Realty LLP will : Execute or participate across multiple projects in an endeavour to mitigate the risk of single project exposure Participate at project level thereby restricting and ringfencing risks Focus on large cities, typically top 7 10 metros for greater liquidity

The risk exposure will be monitored through periodic internal checks and controls

Risk Proportion Single Project Single Business Group Single Metro City

Indicative Cap* 15% - 25% 35% - 50% 40% - 50%

*The above mentioned parameters are indicative and may be changed as per the discretion of the Managing Partner w ith the guidance and insights of the Advisor. These parameters are defined as a percentage of Aggregate Capital Commitment of the Partners of Reliance Realty LLP

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Reliance Realty LLP Key Attributes

Obj ective Eligible Person to become a Partner Time Frame Capital Contribution Capital Calls Minimum Capital Commitment Hurdle Return* Set Up Cost
Post tax 8% p.a. (which is equivalent to a pre tax return of approx 11.6% p.a. at maximum marginal rate of 30.9%) Depending upon Partners Capital Commitment : For Capital Commitment from Rs. 25 lacs upto Rs. 200 lacs : For Capital Commitment above Rs. 200 lacs upto Rs. 500 lacs : For Capital Commitment above Rs. 500 lacs : 4% of Partners capital commitment 2.5% of Partners capital commitment 1.5% of Partners capital commitment To engage in the activity of acquiring, developing and investing in Real Estate assets and projects. Resident Individuals (other than minors) and Body Corporates (including Indian LLPs). No Non Resident, Partnership Firm, Association of Persons or Trust can be a Partner of Reliance Realty LLP. 6 + 1 + 1 (6 years extendable by 1 + 1 year each at the option of the Managing Partner). 30% upfront and balance in tranches 3 years + 1 (3 years extendable by 1 year at the option of the Managing Partner) Rs. 25 lacs and multiples of Rs. 1 lac thereafter

A concession of 0. 2% in set up cost is given to Partners who pre pay their entire Capital Commitment at admission.

Fee paid to the Adv isor & Profit Share payable to the Managing Partner** (In aggregate)

First Year : Nil Thereafter : 1.5% of committed amount during the commitment period and net invested Capital for the remaining tenure 15% of the Profits above the hurdle return with catch up

A benefit of 0. 2% in Advisory Fee is given to Partners who pre pay their entire Capital Commitment at admission

Note: * Hurdle Return is computed on the balances to the credit of respective Partners Capital Contribution Account from time to time. * *The aggregate fees and Profit Share would be payable to the Advisor and Managing Partner by Reliance Realty LLP.

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Lineage of Reliance Realty LLP

Reliance Realty Pvt Ltd (Managing Partner) Reliance Capital Asset Management PMS (Advisor) Reliance Capital Ltd. (Holding Company of the Advisor)
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Reliance Realty Pvt. Ltd. is the Managing Partner of Reliance Realty LLP. The Managing Partner will manage the activities of Reliance Realty LLP and its Business on behalf of all the Partners This shall involve both a Project Specific role and an Administrative role.

RCAM is a Subsidiary of RCL and also the Investment Manager to Reliance Mutual Fund Reliance Mutual Fund is the Indias largest AMC for the last 3 years in terms of average MF assets . Total assets managed are Rs. 1,47,626 Crs as on March 31st, 2011 RCAM has over 7.3 million investors RCAM PMS is a part of RCAM RCAM PMS has significant skill sets in managing / advising on equity, debt including in the real estate sector Amongst the largest NBFCs in India Businesses include Asset Management, Life Insurance, General Insurance, Consumer Finance, Broking, Distribution etc. RCLs Net worth in of approximately Rs 7,700 Crores RCLs Market Capitalization of Rs 12,754 Crores*
* Source : Capital Line as on 30th September 2010 * Source: media release on BSE India
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Reliance Realty LLP An Advantageous Proposition

If Reliance Realty LLP participates as a partner of a Project LLP
In the hands of Reliance Realty LLP, share of profit derived by Reliance Realty LLP as a Partner of a Project LLP will be exempt from tax [Sec. 10(2A) of the Income Tax Act, 1961] Project LLP will neither be liable to any dividend distribution tax (DDT) nor to any Minimum Alternative Tax (MAT), since Project LLP is not a company In the hands of Reliance Realty LLP, income, profits and gains (other than the share of profit derived by Reliance Realty LLP as a Partner of the Project LLP) will be liable to tax in the same manner as a partnership firm @ 30%

If Reliance Realty LLP executes a Project on its own

In the hands of the Reliance Realty LLP, the profits and gains of the Project will be subject to income tax @ 30% Reliance Realty LLP will neither be liable to any DDT nor to any MAT, since Reliance Realty LLP is not a company

No Impact of Alternate Minimum Tax(AMT) levy proposed in the Finance Bill 2011(Refer LLP Fundamentals for details)
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Reliance Realty LLP An Advantageous Proposition

If Reliance Realty LLP participates in a Project being executed by another company or a body corporate
In the hands of Reliance Realty LLP, interest income will be taxed @ 30% In the hands of Reliance Realty LLP, Capital gains from divestment of shares or convertible securities will be taxed @ 20% in case of long term capital gain (on gains computed on the basis of indexed cost) and @ 30% in case of short term capital gain In the hands of Reliance Realty LLP, if the above referred gains from divestment of shares or convertible securities are construed to be business income instead of income in the nature of capital gains, such business income will be liable to income tax @ 30% In the hands of Reliance Realty LLP, dividend received will be exempt from tax under Section 10(34) of Income tax Act, 1961. However the company paying dividend will be liable to pay additional income tax on amount of dividend distributed at the rate of 16.995% of such dividends

In the hands of Partners of Reliance Realty LLP, their share of profit from the Reliance Realty LLP for each of the above mentioned cases A, B and C will be exempt from tax under section 10(2A) of the Income Tax Act, 1961

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Liquidity and Transfer

The Partnership Interest of a Partner in Reliance Realty LLP is transferable. This is on account of either retirement and/or resignation of a Partner. The Partnership Interest is transferable subject to the prior written consent of the Managing Partner

It is the responsibility of the Transferring Partner to Identify an Incoming Partner or an Existing Partner. The Managing Partner, takes no responsibility whatsoever for the same

Upon transfer of the Partnership Interest, the Transferring Partner shall cease to be a partner of the Reliance Realty LLP

The settlement amount payable by the Reliance Realty LLP to such Transferring Partner shall be discharged by an incoming partner or an existing partner identified by the Transferring Partner with the prior consent of the Managing Partner

The Managing Partner in no way shall be liable to discharge the settlement amount payable to the Transferring Partner

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Highest Standards of Governance

Governance
A Governance Committee with 2 external members to ensure highest standards of governance The committee would provide its perspective and non-binding counsel to the Managing Partner on matters which may include choices of potential projects for acquisition and participation outlook on exit s and divestments from existing projects

StatutoryAuthority
Reliance Realty LLP is a body corporate duly registered under the LLP Act, 2008 Reliance Realty LLP and its affairs are subject to administrative oversight of the Ministry of Corporate Affairs The provisions of the LLP Act require LLPs to file various documents, including among others, documents like Statement of Account and Solvency (SAS) and Annual Return (AR) and notices in respect of changes among partners etc. within the time specifically indicated in relevant provisions Offences and penalties arising out of the non-compliance with the provisions of the LLP Act have been prescribed in the substantive provisions of the LLP Act and mechanism for redressal of grievances have been provided therein

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Highest Standards of Transparency & Disclosure

Periodic Disclosures
The partners of Reliance Realty LLP will receive Individual account statements as well as the LLP Financials including Profit & Loss Account, Balance Sheet and Schedules annually

Best Practices
The entire accounting, custody and administration of the LLP would be undertaken by an independent third party agency Deutsche Investor Services Pvt Ltd, who is the market leader in providing such services, has been appointed for the same Reliance Realty LLP has appointed BSR & Associates (one of Big five audit firms) as the Statutory Auditors

Valuation
The valuation of the physical assets of the underlying projects would be undertaken by independent third party International Project Consultants.

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Governance Committee Member Profiles

Mr P P Vora Mr P P Vora, has acted as Chairman and Managing Director for three public limited companies viz. National Housing Bank , Industrial Development Bank of India and Fertilizers & Chemicals Travancore Ltd He was also associated with State Bank of India, where he spent a decade He is a member of Expert Advisory Committee constituted by Government of India for rejuvenation of Housing and Urban Development Corporation (HUDCO) He is currently on the Board of Reliance Home Finance Limited, among various other companies Mr V K Chopra Mr V K Chopra, is a veteran banker having an overall experience of more than 40 years He has served as Chairman and Managing Director of Corporation Bank and SIDBI and Executive Director of Oriental Bank of Commerce He is an Ex-Whole Time Member of SEBI Board He has Directorships with many companies including J. P. Associates Limited, Pantaloon Retail India Limited, Milestone Capital Advisors Limited and Dewan Housing and Finance Limited
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Reliance Realty LLP Fundamentals

Reliance Realty Fundamentals set out in a separate annexure titled LLP Fundamentals are incorporated in this LLP Memorandum by reference, and shall form, and be deemed to form, an integral part of this LLP Memorandum

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Risk Factors
There exist a material possibility of Reliance Realty LLP incurring losses resulting in partial or total loss of the Partners Capital Contribution and there is no assurance that the LLP may make prof its or that it will not incur losses. Neither the Managing Partner nor the Adv isor prov ides any assurance or guarantee as to the return on, or ref und of , the Partners Capital Contribution. Risks Inherent to the Real Estate related business such as project location, macro & micro economic conditions, local economic conditions, etc. may adv ersely af f ect the business of Reliance Realty LLP. Factors affecting Real Estate Business such as quality of dev eloper and the developed property, increase in operating cost, land use and zoning restrictions etc. impacts the Real Estate value creation. Inability to consummate projects and undertake the business proposed on fav orable terms may affect the financial stability, cash flows, results of operation of Reliance Realty LLP. Adv erse conditions in f inancial market may have a material adverse effect on the v alue and returns to the Partners of Reliance Realty LLP Real Estate investments typically are illiquid and requires a long-term commitment with no certainty of returns. The Eligible Persons who agree to become Partners of Reliance Realty LLP should be prepared to continue as partners of Reliance Realty LLP throughout its term, and must hav e the ability to meet their commitment obligations to Reliance Realty LLP with the knowledge that their Partnership Interest in Reliance Realty LLP may not be an acceptable security f or any borrowing. Construction and dev elopment projects are subject to cost ov erruns, third-party performance issues, availability and costs of materials and labour, which may adv ersely affect the interest of the Partners of Reliance Realty LLP. Changes or particular ev ents may affect the financial performance of a Project where Reliance Realty LLP has legal, economic and benef icial interest through participation. Losses such as earthquake, flood, hurricane or act of war may be uninsurable or insurable at excessive premium. Delay in obtaining the necessary government approvals may delay the execution of real estate projects. Risk associated with compliance of land use regulation and any changes /amendment therein. Risk associated with title clearance, as title records provide only for presumptive title rather than a guaranteed title to the land Leasing delay s and tenant bankruptcies could affect the perf ormance of Reliance Realty LLP. Polluter Pay s principle in the sphere of Environmental Laws could affect the performance of Reliance Realty LLP Public Interest litigation in India of ten delays the Real Estate development projects.

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Risk Factors
High cost of land in the metro cities increases the over all cost of the project thus increases the risk of Reliance Realty LLP Cancellation of pre-sale under-construction property by the purchasers may affect the financial stability and perf ormance of Reliance Realty LLP. Sudden global economic and financial meltdown may lead to signif icant decline in employment, household wealth, consumer demand and lending and thus affect the f uture perf ormance of Reliance Realty LLP. Debt Financing Risks may lead to insufficient cash f lows after debt service, refinancing at a possible higher rate of interest, foreclosure of property resulting in consequential loss of income and asset value of Reliance Realty LLP. High inf lation may lead to rising operating or construction costs and reducing the returns to Reliance Realty LLP from its business. Reliance Realty LLP established under the LLP Act, 2008 would not be registered with SEBI, RBI or any other gov ernmental authority. Accordingly, the Partners of Reliance Realty LLP would not have recourse to regulatory oversight of SEBI or RBI with reference to the operations of Reliance Realty LLP. No gov ernment authority has confirmed the accuracy or determined the adequacy of this LLP Memorandum. Legal, tax and regulatory changes may occur during the term of Reliance Realty LLP, which could have an adv erse effect on Reliance Realty LLP and its Partners. Neither Reliance Realty LLP nor its Managing Partner has any operating history of running a real estate business in India. There can be no assurance that the past performance of Reliance Realty LLP or the Managing Partner or their affiliates, is or will be indicative of the future results of partnering with Reliance Realty LLP and there can be no assurance that Reliance Realty LLP will achiev e its stated objectives. The ability to transfer of Partnership Interest is subject to the terms stipulated in the LLP Agreement and theref ore limited. And, in absence of any market f or its transf er the Partnership Interest is inherently illiquid. Limitations on exercise of Voting Rights to the Partners on matters affecting their interests in Reliance Realty LLP. Partners obligation to satisfy the Capital Calls shall not in any way be contingent upon the performance and prospects of Reliance Realty LLP. Partners hav e no participation in management, operations and administration of the Business of Reliance Realty LLP, as these are delegated to the Managing Partner under the LLP Agreement of Reliance Realty LLP. Reliance Realty LLP and the Managing Partner may be, engaged in a broad spectrum of activ ities including in the Real Estate sector. There may be instances and transactions where the interests of the Managing Partner conflicts with the interests of the LLP and the other Partners.

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Disclaimers

This LLP Memorandum is confidential and is intended only for the personal use of the prospective partners to whom it is addressed or delivered and must not be reproduced or redistributed in any form to any other person without the Managing Partners prior written consent. This document does not purport to be all-inclusive nor does it contain all of the information which a prospective partner may desire. This LLP Memorandum is neither a general offer or solicitation to become a Partner of Reliance Realty LLP, nor an offer to sell or a generally solicit an offer to become a Partner of Reliance Realty LLP. The contents of this LLP Memorandum are provisional and may be subject to change. In the preparation of the material contained in this LLP Memorandum, the Managing Partner has used information that is publicly available, certain research reports including information developed in-house. The Managing Partner warrant that the contents of this LLP Memorandum are true to the best of its knowledge, however assume no liability for the relevance, accuracy or completeness of the contents therein. The delivery of this LLP Memorandum at any time does not imply that information herein is correct as of any time subsequent to its date and the Managing Partner (including its affiliates) and any of its directors, officers, employees and other personnel will not accept any liability, loss, damage of any nature, including but not limited to direct, indirect, punitive, special, exemplary, consequential, as also any loss of profit in any way arising from the use of this document in any manner whatsoever. This LLP Memorandum may include certain statements which contain words or phrases such as believe, expect, anticipate, estimate, intend, plan, objective, goal, project and similar expressions or variations of such expressions that are forwardlooking statements. Actual results may differ materially from those suggested by the forward-looking statements due to risks, uncertainties or assumptions. This LLP Memorandum cannot be copied, reproduced, in whole or in part or otherwise distributed without prior written approval of the Managing Partner. The business proposed to be carried out by Reliance Realty LLP are subject to several risk factors including but not limited to the tenancy risk, project opportunity risk, development risk, leverage risk, defaulting contributors risk, tax issues, exit risk, liquidity risk and overall market risks. The recipient alone shall be fully responsible/are liable for any decision taken on the basis of this LLP Memorandum. Prospective partners are advised to review this LLP Memorandum, the Limited Liability Partnership Agreement and other related documents carefully and in its entirety. Prospective partners should make an independent assessment, and consult their own counsel, business advisor and tax advisor as to legal, business and tax related matters concerning this LLP Memorandum, before becoming a partner of Reliance Realty LLP. The information contained in this LLP Memorandum has been prepared for general guidance and does not constitute a professional advice and no person should act upon any information contained herein without obtaining specific professional advice. Neither the Managing Partner nor its Affiliates or advisors would be held responsible for any reliance placed on the content of this LLP Memorandum or for any decision based on it. Each prospective partner, by accepting delivery of this LLP Memorandum agrees to the foregoing.
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