Motilal Oswal Real Estate (MORE), the real estate investment arm of private equity firm Motilal Oswal Private Equity (MOPE), has raised Rs 575 crore (around $80 million at current exchange rates) to mark the first close of its fourth fund.
“We have raised Rs 575 crore for the fund within three months of the launch,” said Sharad Mittal, director and chief executive officer of MORE. “In this fund, we have also witnessed repeat commitments from many existing investors from our previous funds.”
India Realty Excellence Fund IV (IREF IV) has a target corpus of Rs 1500 crore. The fund was launched in May this year.
The limited partners (LPs) of the latest fund are high net worth individuals (HNIs) and family offices.
The company said that the fourth fund’s strategy would be an extension of the investment strategy of its two predecessors - IREF II and IREF III.
The fund plans to deploy the capital in mid-income/affordable residential projects across the top six cities in India, while selectively investing in commercial projects.
IREF IV will focus on early-stage structured equity and structured debt investments with established developers and undertake 12-15 transactions with a ticket size of Rs 80-150 crore.
According to Mittal, the impact of the government's policies such as affordable housing initiative Pradhan Mantri Awas Yojana (PMAY) and the introduction of a regulator via the Real Estate Regulatory Authority (RERA) is gradually playing out across all major cities, indicating early signs of a recovery in residential real estate.
Nearly 75% of new units launched are priced under Rs 75 lakh while apartment sizes over the years have fallen by over 12%, showing developers’ affinity towards affordable housing, he added.
Mittal also said that consolidation has emerged as the dominant theme with large and organised players becoming clear beneficiaries of the RERA regime.
“Under this strict regime, the small-sized developers have found the task of completing their stalled projects very daunting. This has manifested into a huge opportunity for large and organised players as these small developers will eventually sell their projects at distressed valuations,” Mittal said.
MORE has relationships with established developers in each micro-market. It has done repeat transactions with firms such as Casagrand Group, ATS Infrastructure, Rajesh Lifespaces and Shriram Properties.
MORE has till date invested capital in the real estate sector through three real estate funds and proprietary investments. The cumulative assets under management under MORE stands at more than Rs 2,100 crore spread across IREF, IREF II, IREF III and proprietary investments.
MORE said that its second fund, IREF II, which achieved its final close in 2015, has so far made 14 investments and secured seven complete exits at an internal rate of return (IRR) of 22.1%. The fund has returned money equaling 82% of the corpus back to its investors.
MORE’s third fund, IREF III, which achieved its final close last year, has till date made 15 investments and sealed two full exits at an IRR of 22.3%. The fund has returned money worth a quarter of the investible funds back to its investors.
“We have scaled up the real estate private equity business by more than 10 times in the past five years,” said Vishal Tulsyan, chief executive officer of MOPE. “We are very positive about this sector and investing in this segment shall continue to be our focus in the coming years.”
MOPE, which is the alternative investments platform of financial services major Motilal Oswal Group, has more than Rs 5,000 crore in total assets under management.