Piramal Fund Management has raised Rs 500 crore ($82 million) in its Indiareit Apartment Fund and expects to close the fundraising process by March 2015, a senior executive told VCCircle.
Indiareit Apartment Fund is a domestic fund aimed at bulk-buying flats and is being raised from high-net-worth individuals (HNIs), family offices, promoters and is exclusively distributed by IndiaInfoline.
It is targeting a final close at Rs 700 crore ($114 million), including a green-shoe option or Rs 350 crore.
“We wanted to fill the gaps between the developers and the investors through this fund and bulk-buying was one of them,” Khushru Jijina, managing director at Piramal Fund Management, said.
Bulk-buying is not something new for HNIs who invest directly in properties. However, they cannot hold the apartments for long and look to churn their investment and sell it off, which tends to affect prices in the market especially for those particular developers.
“We agree with the developer to hold on the apartments for a set period of time which is two-three years. This is longer than an HNI can hold. After the holding period is over, we agree with the developers on how many flats owned by us will he sell. We have aimed to solve the bulk-buying problem prevalent today,” Jijina added.
The underlying security is the apartments bought by the fund.
“I could sell at whatever rate I want or it could be a buy-back. It could be a combination of both. We buy apartments at a discount of more than 20 per cent,” said Jijina.
The fund is targeting an IRR over 26 per cent and has a life cycle of five years.
It has already disbursed money for its first transaction worth Rs 50 crore to Omkar Alta Monte project in Mumbai. It has also approved two more transactions, in Mumbai (Bandra Kurla Complex) and Chennai (Adyar), which are in final stages of pre-disbursement diligence. Indiareit Apartment Fund will be targeting tier 1 cities like Mumbai, NCR, Bangalore and Chennai.
(Edited by Joby Puthuparampil Johnson)