MUMBAI: Motilal Oswal Real Estate, the real estate arm of Motilal Oswal Private Equity, has raised Rs 500 crore through its second property fund India Realty Excellence Fund (IREF) II after exercising a greenshoe option, a top company executive said.
Based on the response for its second fund, Motilal Oswal Real Estate is planning to launch its third fund with a target corpus of Rs 750 crore.
Out of the total Rs 500 crore, IREF II has already deployed Rs 385 crore through six transactions, including Shriram Properties, Rajesh Lifespaces, ATS Infrastructure, Casa Grande, Ahuja Developers in Mumbai and Mahaveer Group in Bengaluru.
"From the current fund, we have invested around 80 per cent of the corpus in top five cities over the past 15 months. We have partnered with established developers with proven track record in their respective micro markets, and plan to deploy the balance capital in the next 3-6 months and follow it up with a third real estate fund," Sharad Mittal, director & head, Real Estate Fund, at Motilal Oswal Real Estate, told ET.
Recently, IREF II invested in Shriram Properties' 2-million-sq-ft midincome residential project at Old Madras Road in Bengaluru. In its second transaction, the fund has invested in Rajesh Lifespaces' residential project located in Vikhroli, Mumbai. The fund's two other recent investments were in second phase of ATS Infrastructure's Noida project Pristine and Casa Grande's 5.5-acre land acquisition in Chennai.
India Realty Excellence Fund (IREF) II will primarily invest in mid-income residential projects in Mumbai Metropolitan Region, National Capital Region, Bengaluru and Pune.
The proposed fund to be raised in domestic market will also follow the same investment strategy of investing in mid-income residential projects of developers with robust execution and quality track record.
"While bulk of the market is focusing on non-convertible debentures, we are looking at mezzanine financing along with an equity kicker, which is the key differentiator helping us to enhance returns," Mittal said.
IREF II is the second real estate fund managed and advised by the private equity firm. The first fund, India Realty Excellence Fund (IREF), raised in 2010-2011, is currently under exit mode and has already returned around 80 per cent capital to its investors. Of the total seven investments, the fund has so far made four complete exits with gross internal rate of return of 20 per cent.
Motilal Oswal Real Estate had launched the IREF II with a target size of Rs 300 crore and a greenshoe option of Rs 200 crore in early 2014.
The AIF category II fund, which is targeting gross IRR of 23-25 per cent, has a six-year tenure, including two extensions of a year each.