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Indiabulls Real Estate Fund (IREF) has invested Rs.125 crore in an upcoming residential project in south Mumbai, its fourth transaction from the fund.
IREF, the first of the several real estate-focused funds managed by Indiabulls Asset Management Co. Ltd, made the investment in the form of structured debt in a project by the Shree Naman Group.
With this, the fund has deployed almost 90% of its capital. It has invested Rs.100 crore each in projects of Supertech Ltd and Vatika Group in the National Capital Region (NCR) and Rs.125 crore in Sheth Creators Pvt.
Ltd’s project in Mumbai during the course of last year, after launching its fund in February 2015.
The remaining Rs.50 crore will be deployed through another transaction. In line with its proposed strategy, IREF has invested in approved, under-construction and upcoming residential projects with visible sales, primarily in key property markets.
The investments have been done via the non-convertible debentures (NCDs) route.
“It was a successful first attempt by the fund. In 2016, deployment of capital by fund managers like us will be done with a little more caution.
Cost of borrowing of developers have come down with a lot of liquidity in the market and there is a lot of pressure to deploy, but we will invest carefully,” said Ambar Maheshwari, chief executive– private equity, Indiabulls Asset Management Co. Ltd.
Jayesh Shah, chairman of Sree Naman Group, confirmed raising debt for an upcoming project and said the money will be used for project development.
In a month’s time or so, IREF plans to launch a second fund to raise another Rs.500 crore from domestic investors to invest in residential projects this year.
In the last couple of years, India’s real estate sector has witnessed a steady fall in home sales and a rise in unsold inventory.
Private equity (PE) funds and non-banking financial companies (NBFCs) have come to the rescue of many developers who needed capital to refinance loans, kick off projects or for last mile financing for ongoing projects.
“While there are ample investment opportunities in real estate, our measured and calibrated investment strategy of choosing top developers and their quality under-construction projects, has worked and will result in superior returns for our investors,” said Akshay Gupta, group executive head and chief executive officer, Indiabulls Asset Management Co. Ltd.
In 2015, PE funds invested nearly $2.77 billion in real estate projects and companies across 81 deals against $2.1 billion in 2014 through 90 deals, according to data from VCCEdge, which tracks investments.
Demand for capital among developers continues to remain high this year as well.
“Fund-raising and deployment are both challenging in tough times. Fund-raising process for most funds has become a longer process as investors carry out a more rigorous due diligence process before committing capital,” said Shashank Jain, partner, transaction services, PricewaterhouseCoopers India.
“Deploying is tough because funds need to choose the best projects and developers, when they give out money when the sector is going through a rough patch.”
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