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Indiareit managing partner and Piramal group veteran Khushru Jijina. Photo: Abhijit Bhatlekar/Mint (Abhijit Bhatlekar/Mint)
Indiareit managing partner and Piramal group veteran Khushru Jijina. Photo: Abhijit Bhatlekar/Mint

(Abhijit Bhatlekar/Mint)

Indiareit invests `200 crore in 2 deals, to raise `1,000 crore fund

PE fund invests `100 cr in a 17-acre slum project in Mumbai, another `100 crore in Marvel Realtors’ projects

Bangalore: Indiareit Fund Advisors Pvt. Ltd has invested 200 crore in two deals, in Mumbai and Pune, and is raising a 1,000 crore fund to invest in residential projects.

The Ajay Piramal-backed private equity (PE) fund invested 100 crore in a 17-acre slum redevelopment project of Omkar Realtors and Developers Pvt. Ltd in central Mumbai’s Bhoiwada area, and another 100 crore in a number of projects by Pune-based real estate firm Marvel Realtors.

The investment in the Bhoiwada area project was the first from Indiareit’s new 400-crore Mumbai Redevelopment Fund, said Indiareit managing partner and Piramal group veteran Khushru Jijina. The fund was created to exclusively invest in redevelopment projects involving slums or old housing societies.

Indiareit made its first investment in a redevelopment project in 2011, when it put 200 crore into an earlier Omkar slum redevelopment project in Worli, Mumbai.

“Following on from that experience, they successfully raised a fund to solely target redevelopment in Mumbai," said Babulal Varma, managing director, Omkar Realtors.

The Bhoiwada slum will make way for six 40-60 storeyed residential buildings.

As for the Marvel projects, Indiareit invested money from its 900-crore Domestic Scheme IV fund. The capital will be deployed in eight projects in Pune, three in Bangalore, and one each in Mumbai and Goa.

Jijina said Marvel’s line-up of projects suits Indiareit’s preference for slightly small, city-centric projects coming up on land that has been acquired. “Besides believing in Marvel’s development capabilities, these are projects where you can get out quickly," he said, referring to likely exit opportunities for PE funds.

Marvel executives couldn’t be reached for comment.

PE funds have gained in importance for Indian real estate companies in the absence of adequate bank funding for the sector. Developers typically seek PE capital, though costly, to pay for land, fund the completion of their projects, or expand the business.

But unlike the vintage funds of 2005-06 that mostly invested in a company in exchange for equity stakes, PE funds today primarily opt for structured deals that have a combination of debt and equity. For example, while Indiareit’s first investment in the Omkar project was an equity deal, the latest is a structured deal.

Jijina said the entire corpus of Indiareit’s redevelopment fund will be deployed in a year, and that only 70 crore remains to be invested from its Scheme IV fund.

Indiareit is raising a new Scheme V fund of 750 crore, with a 250-crore green shoe option, to invest in residential projects. “We have done a first closing of 50 crore from this fund and will do one more closing of 150-200 crore soon and also start deploying capital," said Jijina.

Indiareit also plans to raise an overseas fund of up to $350 million, but property analysts are skeptical about raising funds from abroad currently.

“While domestic capital is available, it will not be easy for funds to raise capital. Overseas fund-raising will remain fairly tough particularly because large LPs (limited partners) are not giving away large pools of capital anymore,’ said Anuj Nagpal, co-head, DTZ International Property Advisors. Limited partners are the main investors in a PE fund.

In 2012, Indiareit sold about 440 crore worth of investments and plans to exit another 550 crore of investments in the coming months.

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