Bangalore: IIFL Domestic Series 1 fund, the private equity (PE) arm of India Infoline Group, has invested Rs.75 crore in a plotted development project in Faridabad, Haryana—keeping with a recent trend among investors.
It is also in the process of investing a similar sum in two residential apartment projects in Bangalore, the fund’s chief executive Balaji Raghavan said.
Real estate firms are developing more plotted projects than before, particularly in northern India where large tracts of land are available. Developers typically build the basic infrastructure on such land before breaking it into smaller plots to sell.
For PE firms, plotted development projects offer a number of advantages, including quicker turnaround and returns without the funds having to put in much effort, said Ambar Maheshwari, managing director, corporate finance, at property advisory Jones Lang La Salle India.
Kotak Realty Fund, for example, invested Rs.110 crore in Parsvnath Developers Ltd’s 130-acre township-cum-plotted development project at Sohna in the National Capital Region (NCR), Mint reported in November.
“I would think only some funds would look at plotted development projects, that are typically located in the outskirts of cities,” Maheshwari said. “Most funds today want to invest in more city-centric projects that are typically smaller, and easier to exit.”
The Faridabad project, spread across 100 acres, is being developed by Noida-based real estate firm Assotech Ltd. Sanjeev Srivastava, managing director of Assotech, said he didn’t want to comment on any deal at the moment
Raghavan said the IIFL fund is also scouting for small deals of Rs.30-50 crore each with small developers who don’t have much project inventory.
The aim is to invest in more reasonably sized projects to avert risk, he said. “The aim is to not invest in long-gestation projects, where approvals and sales go slow,” said Raghavan.
The fund’s investments in Bangalore are in two group housing, or affordable housing, projects which are being developed by a Hyderabad-based real estate firm.
By April, IIFL’s real estate fund will invest the remaining of the Rs.700 crore it raised early last year for its first real estate fund, Raghavan said. “We are looking at three-four new deals in Mumbai, Pune, Delhi and another one in Bangalore.”
The IIFL fund primarily deals in structured transactions that involve both debt and equity.
Some of IIFL’s investments include a slum redevelopment project in Mumbai by Sheth Creators Ltd early in 2012, and more recently, in the Spire World project in Gurgaon being developed by Millennium Spire Ltd and Ruparel Realty’s suburban Mumbai project.
Once the capital is deployed, a second fund will be raised, said Raghavan, though it hasn’t been decided if the money will be raised from domestic or international investors. “The size of the new fund will depend on if it’s a domestic or overseas fund,” he said.
Last year, 14 offshore and domestic realty funds raised about $1 billion, while in 2011 nine funds raised $927.2 million, according to data from VCCEdge, which compiles data on venture capital and private equity deals.