Indiareit Fund Advisors, the Ajay Piramal group-promoted realty fund manger, was close to raising Rs 3.5 billion (Rs 350 crore) from high net worth individuals for its new property fund, said an executive.
After doing so, it is setting its sights on raising a $250-million (Rs 1,100 crore) offshore fund, lined up for the next financial year.
The Rs 350-crore fund raising will be the initial round of the mopping-up exercise for Indiareit Domestic Fund IV, which has a corpus of Rs 7.5 billion (Rs 750 crore) - with an initial target of Rs 5 billion (Rs 500 crore) and a greenshoe (over-allotment) option of Rs 2.5 billion (Rs 250 crore).
Indiareit is planning to close the fund within two months, Managing Director Ramesh Jogani told Business Standard.
Indiareit's fund raising could augur well for a host of Indian fund managers and developers, who are planning to raise funds worth nearly Rs 75 billion (Rs 7,500 crore) from domestic investors.
While ICICI Venture is planning to launch Rs 10 billion (Rs 1,000 crore) over the next two to three weeks, Aditya Birla Financial Services is planning to close its Rs Rs 10 billion (Rs 1,000 crore) fund by July.
Domestic funds came back in fashion following subdued demand for realty investments in international markets. Even developers such as Unitech, Ackruti City and Shapoorji Pallonji are planning to raise realty funds to invest in their projects.
Indiareit's fund raising is the first such instance of a fund manager mobilising investments in the past four months, after IL&FS Milestone Fund-II raised money this January.
"You can raise funds only if have a proven track record and good management team. I think we are the only (among a) few funds that have done exits in the investments we made," said Jogani.
Indiareit manages funds worth Rs 19 billion (Rs 1,900 crore) in two domestic funds and an international fund. Jogani said Indiareit was planning at least three to four exits in the current financial year. One of its investee firms, Neptune Developers, has already filed for an initial public offer.
Though Indiareit's fund got approval in November 2009, the fund started mobilising resources only in February. It plans to invest Rs 750 million-1.2 billion (Rs 75-120 crore) per project, in cities such as Delhi, Mumbai, Chennai, Pune and Bangalore.
Jogani said the new fund has unique features such as "draw-down holiday" and "mortgage facility" to attract more investors.
A draw-down holiday means if an investor puts in Rs 5 million (Rs 50 lakh) and the fund draws money from him in five tranches, the investor gets the option to drop any one of the draw-downs.
Similarly, the investor also gets 30 per cent mortgage facility from the fund after the payment of 50 per cent of the committed money. While he has to pay interest, the principal will be covered in the exit.
According to Amit Goenka, national director of capital transactions at Knight Frank, at least Rs 50 billion (Rs 5,000 crore) of private equity funds will be deployed in Indian realty in the current financial year. "There is heavy pressure on the unused funds to deploy the money,'' Goenka said.
Adds Shashi Kumar C, head of real estate investment advisory at Aditya Birla Financial Services: "Rather than investing directly in real estate, investors can invest in funds and take exposure in properties across the country. They can also see what is going on in the fund every quarter," he said.
