Bengaluru: Financial services firm ASK Group has invested 365 crore in Mumbai-based realty developer Rajesh Lifespaces’ upcoming residential project in suburban Mumbai’s Vikhroli area through its private equity arm ASK Property Investment Advisors.

ASK’s equity investment—it’s largest till date—has been made from two of its funds—one with a 1,000 crore corpus and another one that is still raising 1,500 crore.

The transaction comes in the form of early-stage finance to help the realtor buy 10.5 acres for the project, which has a revenue potential of more than 3,000 crore and is expected to be completed in phases by 2020.

This is ASK’s second investment in the realty firm. In 2001, it had invested 55 crore in another project from which it exited this year with 124 crore, an internal rate of return of 26%.

“This is a large transaction where we have invested in the land stage and it demonstrates our belief in the developer’s execution capability," said Sunil Rohokale, chief executive and managing director, ASK Group.

Sizes of private equity investments in real estate projects are growing. However, in most cases the capital is in the form of debt or structured debt and equity, unlike ASK’s equity investment.

“For repeated investments, it is pertinent for both developer and investor to be flexible, agile and aligned to market realities. With this large and prime land parcel in the heart of eastern suburb, we are all geared up to make this a landmark project with all the amenities and supreme standard living for the residents," said Rajesh Patel, managing director, Rajesh LifeSpaces.

Rajesh Lifespaces recently raised 40 crore from Milestone Capital Advisors Ltd, when the private equity firm bought apartments in bulk in the developer’s Raj Tattva in Thane, near Mumbai.

Over the last three years or so, real estate transactions have mainly been debt or structured debt capital, with only a few domestic funds committing equity. Equity deals have mainly taken place in the commercial office space with large global funds buying out assets. Among domestic funds, ASK is the only fund that has focused on equity deals.

“Pure equity capital is still a tiny sliver of the entire capital stack that is available to real estate from institutional funds today. The market continues to be dominated by structured debt. There is a lot of demand for equity from developers, particularly in transactions which involve buying land," said Shouvik Purkayastha, executive director and head, capital markets, Cushman and Wakefield India, a property advisory.

“We are expecting more equity and structured equity deals in the next year or so, as the real estate sector revives. Equity capital is patient, long-term capital where funds are willing to partake the risk along with the developer," Purkayastha added.

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