Arnya RealEstates hits first close of ₹375 crore for maiden fund

Arnya RealEstates Fund Advisors, an alternative investment management firm, has raised ₹375 crore, marking the first close of its maiden real estate fund, said a top company executive. 

The fund, Arnya Real Estate Fund – Debt, was launched in April and aims to raise a corpus of ₹1,000 crore, with a green-shoe option of another ₹1,000 crore. 

The firm, which was set up last December by Sharad Mittal, former executive director and CEO, real estate funds at Motilal Oswal Alternates, plans to offer a varied range of real estate investment products, including debt, rental, and equity investments.

Registered as a Category II Alternative Investment Fund (AIF) with market regulator Sebi, Arnya's first fund will focus on providing early-stage growth capital in the form of structured debt, to residential projects in the top eight cities - Mumbai Metropolitan Region, Delhi-National Capital Region, Ahmedabad, Pune, Bengaluru, Chennai, Hyderabad and Kolkata. 

“The residential sector has recovered well, and is expected to continue to do well in the coming years. As the market grows, the capital requirements of developers looking to expand will also be high. As an investor, we will address a developer's funding requirement for land payments, approvals etc in the first stage of a project,” Sharad Mittal, founder and CEO,  Arnya RealEstates Fund Advisors, said in an interview. 

The remaining ₹625 crore of the fund corpus will be raised by March 2025.  

The real estate sector has seen a sharp turnaround in the aftermath of the pandemic. With the revival in demand from home buyers fuelling a rise in residential sales, developers have also been emboldened to shop for land parcels.Arnya is in active discussions with three developers for potential investments, and plans to close its first transaction in the next two months, Mittal said. 

The average deal size will be between ₹80 and 125 crore, and it will combine the fund's investment with co-investments from investors.  

A June report titled ‘Decoding Debt Financing: Opportunities in Indian Real Estate’ by property advisory JLL and Propstack said that it is estimated that the long-term debt requirement in the residential market itself will amount to nearly ₹430,000 crore till 2026. 

"…To support developers at different stages, innovative and customized funding structures are needed, offering a lot of opportunity for AIF (alternative investment funds). Private credit will continue to play a crucial role, particularly in the residential sector. Shifting focus to smaller developers who make up over 2/3rds of the residential market can make funding more inclusive," said Lata Pillai, senior managing director, capital markets, India, JLL.