Bangalore: LIC Housing Finance Ltd’s maiden real estate fund has made four investments in mid-income housing projects in Pune and Bangalore, including in one by entrepreneur Jaithirth Rao’s Value and Budget Housing Corp. Pvt. Ltd (VBHC), a top fund official said.

The 530 crore fund, which finished raising the money last year in March, focuses on investing in housing projects, putting in 50-70 crore in each transaction.

LICHFL Urban Development Fund will also invest part of the corpus in information technology (IT), IT-enabled services and warehousing projects. “The investment focus will remain on mid-income housing, where there is no sluggishness and offtake is good," chief executive A.K. Sharma said.

The fund will look to close 4-5 deals this year, investing around 200 crore.

LIC’s fund invested an undisclosed amount in VBHC’s second project in Bangalore, in Kengeri.

VBHC used the money largely to acquire the land for building about 200 apartments, said a person familiar with the development, but didn’t want to be named.

The fund’s second investment in Bangalore was in a project developed by city-based realty firm Mahaveer Groups.

Sharma didn’t disclose specifics for the Pune deals citing ongoing transactional clauses.

As is the case with most real estate funds these days, LIC is deploying the money largely through so-called mezzanine (a mix of debt and equity) transactions. With the first fund, Sharma said the intention is to build a good track record, selectively choosing partners.

“It was a conscious decision to look at markets that are stable, where absorption is higher. As a risk mitigating exercise, we are now open to look at other locations, in NCR (national capital region) and MMR (Mumbai metropolitan region)," he said.

LIC Housing Finance plans to roll out a second fund once 50-60% of the first fund is deployed, Sharma said.

The real estate sector has seen a considerable slowdown in sales in the residential space, but analysts say mid-income housing projects have been impacted less.

“PE funds will be keen in investing in affordable housing because there is strong demand in such projects," said Deepak Shandilya, senior director at MAPE Advisory Group. “Wherever a project sells well, the funds will come."

On Wednesday, private equity firm Brick Eagle Capital Group-backed Sheltrex Developers Ltd entered into a partnership with Cyprus-based Jarvinia to develop a budget housing project in Chennai’s Oragadam area.

The township will have one and two bedroom apartments priced at 15 lakh and 20 lakh, respectively.

Under a joint development agreement, Jarvinia controls around 170 acres of development rights in the Oragadam project and has appointed Brick Eagle to manage the promotion of an integrated affordable housing township, said Rashmi Parekh, director, Jarvinia.

Brick Eagle, also a land-banking firm that funds and advises low-cost housing developers, has incubated firms such as Sheltrex and Xrbia Developers Pvt. Ltd.

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