ASK Property Investment Advisors, part of the financial services group ASK Group, has made a first close of its second real estate fund at Rs 520 crore ($115 million). ASK Real Estate Special Opportunities Fund, which is targeting Rs 1,000 crore, expects a final close by December this year, a top official told VCCircle.
The fund has been raised from domestic investors, primarily from the high net worth individuals (HNIs) and family offices.
The real estate sector, which witnessed a pickup in demand over the past two years across residential properties and commercial market, once again faces a challenging time as property prices have rebounded sharply in key markets after a brief slowdown and rising interest rates are expected to affect fresh demand, especially in the home segment.
“We will continue the strategy of investing in city-based and suburban-centric, smaller-gestation projects, which can be launched within 12 months from the date of investment and can be completed within 3-4 years from the date of launch,” said Amit Bhagat, CEO & MD of ASK Property Investment Advisors Pvt Ltd.
ASK Property Investment focuses on the mid-segment residential projects in seven cities – Mumbai, Delhi-NCR, Bangalore, Chennai, Pune, Hyderabad and Kolkata. Its first fund, which raised Rs 340 crore as portfolio management scheme (PMS), has already been committed across six projects in 18 months. Sunil Rohokale, executive director of ASK Investment Holdings, has said that the ASK Group currently has real estate assets under management of Rs 850 crore, but it is expected to cross Rs 1,500 crore shortly.
The new fund, which was launched in January this year as a domestic venture capital fund, will look at deal sizes between Rs 75 crore and Rs 100 crore, picking up 26-51 per cent stakes in projects.
“In the current context, it is a wonderful recapitalisation opportunity as the liquidity situation is tight in the sector,” Bhagat told VCCircle.
The real estate sector has been facing liquidity issues with the banks restricting funding, as the Reserve Bank of India has increased lending rates.
According to Bhagat, PE funds have opportunities where developers seek funding at the project level since they don’t have the money to buy land parcels. Another opportunity is investing in projects where developers are sitting on land and looking to de-leverage or consolidate their investments. Bhagat has said that the fund is currently looking at opportunities in Mumbai, NCR, Pune, Bangalore and Chennai.
Private equity firms invested $1.34 billion across 42 transactions in the real estate sector in the calendar year 2010, according to VCCedge, the financial research platform of VCCircle. So far this year, there have been 14 deals worth $482 million in the sector.
There are several players looking to tap domestic investors for real estate funds. ICICI Ventures has launched a Rs 1,000 crore fund called India Advantage Fund Real Estate Series 2 while Milestone Capital is raising Rs 500 crore for its third domestic fund.
Some players like JM Financial Property Fund, Anand Rathi Financial Services and Indiareit are also raising funds which will be invested in rental yield assets.