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Sharad Mittal, director and chief executive, Motilal Oswal Real Estate Fund.
Sharad Mittal, director and chief executive, Motilal Oswal Real Estate Fund.

Motilal Oswal looks to raise 800 crore for real estate fund

  • The fund is expected to achieve its first close by March and the final close in 6-9 months
  • The new fund will deploy capital in mid-income or affordable residential projects

Motilal Oswal Real Estate (MORE), the realty-focussed private equity arm of Motilal Oswal Financial Services Ltd, plans to raise a 800-crore fifth fund, India Realty Excellence Fund V (IREF V), it said on Wednesday.

The three earlier funds focused on early-stage real estate deals, while IREF V will offer construction finance to projects that have received all approvals. The new fund will deploy capital in mid-income or affordable residential projects across Mumbai, Delhi-NCR, Pune, Bengaluru, Chennai, Hyderabad, and Ahmedabad. It will also invest in select office projects.

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IREF V, which has been registered with the Securities and Exchange Board of India (Sebi) as an alternative investment fund (Category II), will focus on structured debt and invest 60-80 crore each across 12-15 transactions. It is expected to achieve its first close by March and the final close in 6-9 months.

The last few years were challenging for the real estate sector because of the impact of regulatory reforms and the liquidity crisis following the Infrastructure Leasing and Financial Services debacle in September 2018, MORE director and chief executive Sharad Mittal said. “With NBFCs (non-banking financial companies) putting the brakes on new lending and banks becoming selective, there has been a huge gap in construction finance over the last two years," he said.

Recent months saw strong recovery in demand fuelled by multi-decade low mortgage rates, stagnant prices, and narrowing demand-supply gap in inventory, Mittal said. “These factors will lead to a resurgence in residential demand over the next few years. We believe that this is an opportune time to launch our next fund, which will focus on construction finance and post-approval funding," he said.

Since MORE launched its first fund, it has invested in the realty sector through four funds with cumulative assets under management of more than 3,700 crore, including IREF ( 200 crore), IREF II ( 500 crore), IREF III ( 1,030 crore), IREF IV ( 1,150 crore), and the rest through non-convertible debentures and portfolio management services.

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