Home / Companies / Aditya Birla Real Estate Fund in process of closing two investments

Bengaluru: Aditya Birla Real Estate Fund is in the process of closing two investments in projects of Chennai-based Barath Building Construction Pvt. Ltd, as the 1,100 crore fund reaches its final leg of deployment, said a top fund executive who didn’t want to be named.

Once fully deployed, it plans to raise a new, second fund.

Aditya Birla Real Estate Fund, part of the Aditya Birla Financial Services Group, has deployed 60 crore in Barath Building’s forthcoming eight-acre project in Thoraipakkam, Chennai, at an early, land-acquisition stage.

“We have entered into a 70:30 joint venture with the developer for the project, that will have around 700,000 sq. ft of residential development," said the executive.

In another transaction, the fund is in the process of investing 75 crore in a redevelopment project in Chennai, where an existing hotel would be demolished for residential development, on about two acres of land.

Unlike debt-like transactions employed by real estate funds these days, these would be pure equity investments.

Barath Building currently has around 2 million sq. ft of real estate development in the city and has completed 40 projects.

Ananth Vummidi, managing director of Barath Building, declined to comment on the transactions.

With the investments in Chennai, Aditya Birla Real Estate Fund completes about 12 deals. The investments have all been in residential projects in the top five property markets of Mumbai, the National Capital Region , Pune, Bangalore and Chennai.

“We plan to do another three investments or so before fully deploying the fund corpus. Once that is done, by the first quarter of next year we hope to raise a second fund," the executive said. He didn’t give further details.

Before the Barath transactions, the fund had made a bulk purchase of apartments for 90 crore in Mumbai-based Kohinoor Group’s Dadar mixed-use property, which has residential and office space components. The fund invested in the residential segment Altissimo, which is currently under construction.

A Kohinoor spokesperson declined to comment.

At a time when home sales are particularly low, a number of private equity (PE) funds are looking to buy apartments at steep discounts to market prices.

Indiareit Fund Advisors Pvt. Ltd, backed by the Ajay Piramal group, started buying residential apartments in bulk from developers earlier this year when they launched an apartment fund.

More recently, former Indiareit head Ramesh Jogani partnered Centrum Capital Ltd to deploy 250 crore in buying apartments in bulk.

Over the last couple of years, PE funds have displayed a keen interest in the Chennai property market, as developers have gone on to raise capital to build and purchase land.

However, unlike Bengaluru, which has somewhat survived a nationwide real estate slowdown, Chennai has seen a slow sales phase.

“Developers in Chennai are facing the challenge of weak property-buying sentiment, but we hope that will improve soon," said Sanjay Chugh, head of residential services (Chennai) at property advisory Jones Lang LaSalle India. The good thing, Chugh said, is that prices in Chennai have remained largely rational and have stabilized, and there is good infrastructure, which will connect the city centre with distant suburbs.

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