Mumbai: The real estate demand may not have revived across the country but that has not deterred investors to launch real estate funds mainly to invest in the residential projects.
This year real estate funds of around Rs 10,000 crore to Rs 12,000 crore has been launched across the country compared to Rs 2,500 crore to Rs 3,000 crore last year.
While some of the funds have already closed others are in the process. Experts said that companies are interested in investing in the residential real estate as the asset valuations are lower at the moment and the funds expect to get good returns in the future.
Firms like Centrum Capital, Indiareit Fund Advisors, ASK Property, Milestone Capital Advisor, Reliance Capital Asset Management, Nisus Finance Services, Black Soil among others have all launched funds mainly to invest in residential real estate.
While Centrum has recently launched Rs 250 crore fund, with a greenshoe option of Rs 100 crore, Indiabulls is expected to launch Rs 500 crore real estate fund soon.
Centrum is looking at investing in Mumbai residential properties where it will be buying bulk flats and will be investing in five to six properties in the city.
“It is a good time to invest in Mumbai market where we could cash in on price difference between pre-launch and completed flats. We have started the domestic roadshows and initial response is encouraging,” says Ramesh Jogani of Centrum.
Indiabulls Group is likely to launch a private equity (PE) fund through the alternative investment fund (AIF) route and will kick off the venture with a real estate fund. The high-risk, high-return AIFs invest in a wide range of sectors, including real estate, infrastructure and credit derivatives, among others.
Indiabulls has hired Ambar Maheshwari as chief executive of the AIF-PE business. Indiabulls Asset Management Co, a subsidiary of Indiabulls Housing Finance (IBHFL), will manage the AIF business. The AIF will kick off with Rs 500 crore fund, to be raised mainly from wealthy domestic individuals. The fund will have the option of raising an additional Rs 500 crore, and will invest primarily in residential projects through debt instruments, a source close to the development said.
Pankaj Kapoor, chief executive officer at Liases Foras, said with the FDI norms getting relaxed more investors are lining up to invest in the sector.
Kapoor said the cash strapped sector is heaving a sigh of relief as they are in dire need of liquidity. But in the long run it is really not good for the sector, as developers are getting the holding power resulting in real estate prices not declining. Although demand is subdued, real estate prices have remained stable and have not declined significantly. Further, these funds are expecting very high returns.
ASK Property Investment Advisors (ASKPIA), the real-estate private equity arm of ASK Group, recently announced the launch of its fourth issue, “ASK Real Estate Special Opportunities Fund II”, of Rs 1,500 crore. This is the largest domestic real estate fund by any player in the industry in the past five years. The fund will invest predominantly in self-liquidating residential projects in six major cities like Mumbai, Pune, Chennai, Bangalore, Delhi-NCR and Hyderabad, the company said.
Sunil Rohokale, managing director and chief executive officer, ASK Group said, “Our previous real estate funds have generated superior returns during tough times. This has encouraged us to launch a larger fund considering the opportunities in the markets. We intend to raise this through domestic institutions and high net worth individuals. ”
The company will continue to focus on its strategy of investing in mid segment residential projects.
ASK Group manages real estate assets of more than Rs 2,100 crore. The group has successfully raised two domestic funds and an offshore fund. ASK Real Estate Funds has already announced first exit with a multiple of 2.45 in over two years and second with a multiple of 2.35 multiple in Pune in over three years, Rohakale added.
Indiareit Fund Advisors, the real estate private equity arm of Piramal Enterprises, has also closed Rs 1,000 crore fund early this year.
Khushru Jijina, managing director of Indiareit, said, “We are witnessing very healthy levels of deal flow and are able to pick the best transactions given the real estate market dynamics.”
The scheme is targeting structured returns and had already deployed 10 per cent of the fund to its first deal – a Rs 100 crore investment in a joint venture between Ashiana Homes and the Landcraft Group. The project is located in sector 88A, Gurgaon which has access from Pataudi Road, and will benefit from upcoming developments, including the under construction Dwarka Expressway, and the fast growing New Gurgaon region. The land parcel is spread across 14 acres with total saleable area potential of around 1.5 million sq ft. The investment is structured to provide an assured minimum return along with an equity kicker, and is backed by adequate security cover.
Since then, the fund has approved two new transactions – the first is Rs 60 crore investment in a residential project in Mumbai and the second, Rs 90 crore investment in Bangalore.