Reliance AIF raises `400 crore, invests in four projects

Bengaluru: Reliance AIF Asset Management Co. Ltd has raised about ₹ 400 crore in an initial close of its first real estate fund, under the norms for alternative investment funds (AIF). The fund has invested the capital across four transactions—one residential project each in Mumbai and Bengaluru and two in Chennai.

Reliance AIF, a 100% subsidiary of Reliance Capital Asset Management Ltd, is raising a total of ₹ 1,000 crore under its first AIF initiative, Reliance Yield Maximiser Alternative Investment Fund Scheme 1, that was launched in early August.

The fund will raise another ₹ 200 crore, in a second interim close, within a couple of months. The target corpus of ₹ 1,000 crore will be fully raised by March, 2015, said Shahzad Madon, head of project management services and alternative assets at Reliance Capital Asset Management.

“We are receiving a very strong response for our offering. In the best interest of our investors, our priority has always been to raise only those funds which can be deployed in the highest quality assets in a timely manner,” said Madon.

Reliance’s new fund primarily invests in secured debentures and focuses on residential projects that are in an advanced stage of construction development, across the top metros, including Pune and the National Capital Region.

The size of each transaction will be ₹ 40-120 crore, with a 20-24% target internal rate of return. The projects will largely be city-centric where buyers are more easily available.

The fund is likely to close approximately 15 transactions from the ₹ 1,000 crore corpus.

In October, Crisil assigned a Crisil Fund Management Capability Level-1 rating to the fund that reflects the highest standards in fund management capability and investment process.

This year has been a robust one for fund-raising and capital deployment for many real estate funds, particularly those who set out to raise money from domestic investors. Based on announcements made since the start of this calendar year, Indian realty-focused private equity funds are looking to raise nearly $6 billion, in addition to $1.6 billion that has already been raised, mint reported in August.

Before the AIF fund, Reliance Capital Asset Management, through the project management services platform, has raised around ₹ 1,400 crore and deployed the same across 31 transactions from 2011 till now.

It has clocked 14 exits and has paid around ₹ 640 crore back to investors.

AIFs invest across sectors, real estate being one, and are not allowed to accept investments below ₹ 1 crore. A number of real estate funds are either being raised or are deploying capital under the AIF norms.

Maadhav Poddar, associate director, real estate practice, at EY, said a decent amount of domestic capital has been raised through the AIF platform in the last couple of years.

“While there is a lot of capital waiting to be deployed in the real estate sector, fund managers are more cautious and measured about investing and are looking for the right project and promoter,” said Poddar.