The money, as part of its third real estate fund, has been raised from high networth individuals and family offices.
MUMBAI: Motilal Oswal Real Estate, the private equity real estate fund of Motilal Oswal Group, has raised over Rs 800 crore to invest in residential projects of developers in Mumbai Metropolitan Region, Delhi-National Capital Region, Bengaluru, Pune, Hyderabad and Chennai.
The money, as part of its third real estate fund, has been raised from high networth individuals and family offices. The fund set up as an alternative investment fund, or AIF category II, will target a gross internal rate of return of 23-25% from its investments. The funds will have a tenure of five years from final close and two extensions of one year each.
"We achieved first closure of Rs 600 crore for the fund in four months of the launch that was done in November. Given the performance of our second fund, we are witnessing repeat commitments from many existing investors. We are on our way to conclude entire targeted fund raising of Rs 1,000 crore over the next three months," said Sharad Mittal, head, real estate fund, Motilal Oswal Real Estate.
In March 2015, Motilal Oswal Real Estate had raised Rs 500 crore through its second real estate fund. This fund is fully committed across eight transactions in residential projects in top five markets including MMR, NCR, Pune, Bengaluru and Chennai. The second fund has already returned nearly 30% money to its investors.
Motilal Oswal's strategy is an extension of its experience with its earlier two funds wherein it invested capital, typically under mezzanine structure, in top five property markets with developers such as ATS, Kolte Patil Developers, Shriram Properties, Rajesh Lifespaces, Skylark and Casa Grande. The new fund will also focus on top six property markets in the country.
"Over the past few years, real estate investing has become one of our key verticals under the private equity business. We are committed to grow this vertical further. We now manages a total AUM of Rs 2,000 crore under real estate private equity," said Vishal Tulsyan, CEO of Motilal Oswal Private Equity Investment Advisors.
The first fund worth Rs 200 crore, which Motilal Oswal Real Estate had raised in 2009, has also been fully deployed and is currently in exit mode. The fund has exited its four out of total seven investments from this fund and has returned about 86% of the capital.
Recently, Motilal Oswal Real Estate exited from its investments in Bengaluru-based Mahaveer Developers' two projects with 30% gross internal rate of return. The fund is in the process of exiting another investment made in a residential project of a Chennai-based developer Casa Grande.
"We have seen the entire real estate cycle, and have acquired expertise across all investment structures including structured equity, mezzanine and debt funding," said Mittal. The third fund will look at transactions ranging between Rs 50 crore and Rs 150 crore across six property markets in the country.
Several private equity funds are in the process of raising capital to invest in residential real estate sector given the ongoing consolidation phase. Many of these funds expect prices to remain stagnant for some time, and are offering an opportunity to invest in these projects.