ArthVeda plans to raise $250M offshore realty fund, eyes domestic fund too

ArthVeda Fund Management Pvt Ltd, the private equity arm of Dewan Housing Finance Corporation Ltd, is raising an offshore real estate fund - Star Offshore - with a target corpus of $250 million, Mint reported citing a senior executive of the company.

The fund will look at investments in mid-income housing projects priced at Rs 25-60 lakh across 12-14 locations. It will seal deals in the form of equity with ticket size in the range of Rs 30-50 crore. It will tie up with project developers at land acquisition stage.

“Investors in the past have put their money in a blind pool arrangement, and have lost money in the process, where they didn’t know where the money was being deployed. That old investment strategy won’t work and so we have a specific strategy where we will do residential deals in a certain price segment, with a three-to-five-year project tenure,” the report quoted Bikram Sen, chief executive and director, Arthveda Fund Management.

Equity funding has gone down substantially in real estate over the last four-five years. With a turnaround in sentiments around India, firms are re-looking at sealing pure equity and equity flavoured transactions. Recently, Religare announced that it will be raising $350-500 million over three-five years from offshore investors for equity investments in India.

The PE funds that continue to seal equity deals include ASK Group and Avenue Venture Partners.

The firm is simultaneously planning to raise a domestic fund of Rs 150-200 crore. The fund called Asha will chase investments in low-cost housing projects of 400-600 sq ft and will deploy Rs 5-10 crore per project.

The fund will be raised in collaboration with Aadhar Housing Finance Ltd which is a part of International Finance Corporation.

On the back of Modi government’s push towards housing for all, developers are increasingly getting into development of low-cost housing. While there is a thrust from developers, mainstream PE funds have stayed away from it citing thin margins. Read here for more.

Arthveda currently manages two funds—Arthveda Star Fund (2011) and Dream Fund I (2006). The first fund has corpus of $60 million and chases investments in real estate and the second fund invests across real estate and hospitality from its corpus of $45 million.

(Edited by Joby Puthuparampil Johnson)

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