Real estate fund managers are looking to raise alternative investment funds (AIFs) in a big way, probably the highest amount of fund raising by them in the last seven years. Some are already in the market to raise funds.
The revival in real estate segment and renewed interest by investors in these funds is believed to be reason the behind new funds flooding the market.
Almost all big names such as Motilal Oswal, Godrej Fund Management, Welspun One Logistics Parks, Edelweiss and others are looking to raise new real estate funds, said sources in the know. ASK Property Fund and a partneship of Axis Mutual Fund and Tishman Speyers are already in the market to raise new real estate funds.
Cumulatively, the property fund manages are looking to raise as much as `8,000 crore from investors, experts said.
Motilal Oswal Alternates is planning to launch is sixth real estate fund (Category II AIF) with a target corpus of `2,000 crore.. The fund is currently awaiting Sebi approval and it expects to launch it in March this year, said Sharad Mittal, executive director & CEO, real estate funds at Motilal Oswal Alternates.
Although the fund will be deployed primarily in residential projects, they would also be exploring to fund warehousing and commercial projects through the new fund, he said.
The fund will aim to make 25-30 investments with an average ticket size of `70 – 80 crore. The fund will be raised on a private placement basis and the minimum ticket size for investors to invest in the fund would be `5 crore. The fund will target to generate gross investment returns in the range of 20-22% IRR (internal rate of return), he said.
“We expect to raise the funds towards our target corpus within a year of launch and plan to fully deploy the fund a year after that,” Mittal said.
According to sources, Welspun One Logistics Parks is in the market to raise `1,000 crore from investors to invest in warehousing projects.
Welspun One committed 100% of its `500 crore corpus across six investments to create a portfolio of `2,300 crore spanning five cities–MMR, NCR, Bengaluru, Chennai and Lucknow– aggregating to about 6.6 million square feet of gross leasable area, it said in November last year.
In 2021, the firm raised India’s first AIF focusing on warehousing development.
When contacted, Welspun One said it won’t be able to comment on the queries sent on the subject.
ASK group has already raised `800 crore in its latest `1,500 crore real estate fund, said Sunil Rohokale, managing director and chief executive at ASK group.
It did the first close in mid last year and looking to do final close in next three months, he said .
Rohokale said 68% of investors in in its new fund are repeat investors.
“We will do mid mile and last mile financing and it will be a high yield credit fund,” he said.
According to sources, both Edelweiss and Godrej Fund Management are looking to raise new property funds separately. Both Edelweiss and Godrej Fund Management said they wont be able to comment on the subject.
Some of the big fund managers have already raised property funds..
HDFC Capital Advisors, owned by HDFC, recently made the initial close for Scheme 2 of the HDFC Capital Affordable Real Estate Fund – 3 (H-CARE 3) at $376 million.
A year ago, it had closed $1.88 billion of H-CARE 3 taking the Schemes 1 & 2 combined total estimated fund corpus of $2.2 billion making H-CARE 3 one of the largest funds raised to invest in the residential real estate in the country.
Some of the developer backed funds have also raised money.
Mt. K Kapital , set up by Rustomjee group, has raised over `350 crore through the initial close of its residential development fund from anchor investors such as SBI, pharma company Famy Care, Rustomjee Group, family offices and HNIs.
Shobhit Agarwal , managing director and chief executive at Anarock Capital attributes the trend of new funds to the revival in interest in the real estate sector led by a buoyant economy, translating into robust demand. “Additionally, there are consolidation and greater formalisation seen in the sector post implementation of RERA. Finally, a significant number of NBFCs active in real estate sector have reduced their exposure to real estate credit creating demand for alternate sources of capital,” he said.
Besides this, there is interest in industrial and warehousing assets, which provide healthy yields as well as provide a hedge against inflation, he said.
“India is the most resilient market in the world and mature investors understand the importance of investing money especially when things may look shaky but deeper analysis would provide comfort to invest for long term,” said Somy Thomas, managing director, valuations and advisory and co-head capital markets at property consultant Cushman & Wakefiled.