Mumbai: Jaydev Mukund Mody, a gambler-turned-entrepreneur and the founder of Delta Corp. Ltd, the company focused on casinos in Goa, has entered the real estate investment business through his new Rs.500 crore private equity fund.
Eagle Capital Advisors Pvt. Ltd has launched the fund, Alpha Advantage Real Estate Fund, with a green shoe option of an additional Rs.500 crore, a senior executive said.
A green shoe option allows the fund to raise more money than originally planned.
The fund, headed by Sudarshan Bajoria, former director and co-head, real estate, at ICICI Venture, will focus on domestic mid-sized projects. It has a tenure of six years that can be extended by a further two years.
Mody, who cut his teeth in the real estate development business (he developed Mumbai’s iconic Crossroads Mall), will be the non-executive chairman of the fund, while Bajoria will be the managing director.
Mody has also been involved in the development of several large residential and commercial complexes in Mumbai, including Peninsula Corporate Park, Ashok Towers, Ashok Gardens, and Peninsula IT Park.
Mody’s experience in real estate development and his own in “investment” will help the fund “reap better returns for investors”, Bajoria said. “The fund will do two to three deals in a year with a ticket size of Rs.50-100 crore,” he added.
The fund, Bajoria said, will work with the developers of mid-sized projects (400,000-500,000 sq. ft) that are in their initial stages, across Mumbai, Pune, and Bengaluru.
Alpha Advantage is entering the space at a time when real estate developers are looking for funds in a market characterized by tight funding and poor demand. “The current scenario offers an opportunity for private equity players to invest in realty projects and bargain for better returns. Currently, there is no dearth of debt funds in the real estate market; competition is stiff, leading to lower yields and IRR (internal rate of return), and refinancing is prevalent leading to prepayment of investments,” said Mody, whose wife Zia Mody is one of India’s best-known corporate lawyers.
With the Reserve Bank of India making it easier to launch real estate investment trusts, or REITs, and infrastructure investment trusts, several investors are in fund-raising mode.
“Pure equity investments are making a strong comeback in the real estate space,” said Ramesh Nair, chief operating officer and international director at property consultancy firm Jones Lang LaSalle India.
The interest of new investors from China and Japan in Indian realty will make the fund-raising easy for newcomers (such as Alpha Advantage), Nair added.
Indiabulls Alternative Investments Ltd has plans to raise Rs.1,000 crore for a new fund from non-resident Indian investors based in West Asia, Asia-Pacific and Europe.
IIFL AMC Ltd is raising a Rs.750-crore debt fund, which will be India’s first category III AIF (alternative investment fund) real estate fund, Mint reported last month.
Piramal Fund Management Pvt. Ltd, part of Piramal Capital, the financial services unit of Piramal Enterprises Ltd, is launching a $250 million (about Rs.1,600 crore) platform with a pension fund to undertake equity investments in residential projects, Mint reported in April.
Piramal Fund launched a $500 million platform with Canadian Pension Plan Investment Board to provide debt financing to residential real estate firms in 2014.
Poor demand for homes has brought down private equity investments in Indian real estate in 2016.
Private equity investments dropped 42% in the six months ended 30 June to $954 million from the year-ago period, according to data from VCCedge.
Private equity funds invested about $1.6 billion in real estate projects between January and June 2105.