Indiareit Fund Advisors Pvt. Ltd, the real estate fund promoted by Piramal group chairman Ajay Piramal plans to raise around Rs.1,350 crore in a debt fund and a rental yield fund early next year.
The debt fund will lend to property developers and the rental yield fund will invest in information technology parks and commercial offices in Mumbai, Bangalore, Pune, Chennai, Hyderabad and New Delhi, Indiareit’s managing director and chief executive officer Ramesh Jogani said.
Investors could expect a return of around 13-14% in the debt fund and minimum of 12% from the rental fund, added Jogani.
A rental yield fund offers lower risk compared with one investing in projects that are still under development, he said.
“There is an assured income and a potential upside in a rental yield fund and there is a lot of investor appetite among the high net worth individuals,” said V. Hari Krishna, director, Kotak Investment Advisors Ltd, which invests in private equity (PE) and real estate funds.
According to data from Venture Intelligence, which tracks venture capital and (PE) deals, the realty sector has seen 32 PE deals worth $1.28 billion between January and September compared with 28 deals worth $853 million in the same period last year.
Mint reported on 15 September that Anand Rathi Financial Services Ltd had tied up with real estate consultancy firm Knight Frank India Pvt. Ltd to raise around Rs.250 crore in a rental yield fund.
It will invest in two office projects in the Bandra-Kurla Complex and Andheri in Mumbai.
“In the commercial space today, there is excessive supply and less investment, but in a two-three year time frame, demand will exceed the supply and such properties will give good returns,” the fund’s executive director A.V Srikanth had told Mint.
The fund is targeting 18% internal rate of return.
IL&FS Milestone Fund also runs two rental yield funds.
“It is a low-risk situation,” said Kaustuv Roy, executive director at real estate advisory firm Cushman and Wakefield India, commenting on the rental fund.
Indiareit will also launch a property-specific fund in 2011. Besides these, Indiareit will raise its second offshore fund of $400 million after it exits from its first such fund next year. The first $250 million offshore fund was raised in March 2008. Indiareit, which has invested in IT parks and residential spaces has also raised Rs.1,955 crore in three domestic funds and invested 70% in residential properties. Apart from investing in realty projects, Indiareit advises London-listed Trikona Trinity Capital Plc., which manages a Rs.1,200 crore fund in India.
Globally, lease and lock-in periods of rental yield funds are upwards of 10 years compared with a five-nine year lease period and a three-four year lock-in period in India, Roy said.
Source: Livemint