Piramal raising up to $117M in apartment fund to buy residential flats in bulk

Piramal Fund Management, a part of Piramal Enterprises, has launched a new fund christened ‘Indiareit Apartment Fund’ chasing purchase of individual residential units, with a target size of Rs 700 crore including a green-shoe option of Rs 350 crore.

The fund has already garnered commitment of Rs 100 crore within 10 days of launch and has already invested Rs 50 crore across one deal in Mumbai’s western suburbs.

The firm expects average deal tenure or asset holding period of two-three years per transaction.

Piramal Fund Management expects to raise Rs 350 crore over the next three months. IIFL Wealth Management is acting as exclusive distributor for the first close. It will be raised through domestic HNIs and family offices besides commitment from Piramal group, which will invest 7.5 per cent of the total corpus.

“The trend of buying houses in bulk has been there for years but restricted to HNIs. Being an institution, we purchase in bulk and enter an agreement with the developer where he will sell our apartments in a proportion to his after a stipulated time,” Khushru Jijina, managing director at Piramal Fund Management told VCCircle.

The deals with the developers can be structured in a pure structured equity buy or in a way where the developer guarantees a minimum internal rate of return (IRR) and above that, the returns will be shared by both. The fund will target the mid-level priced apartments.

The fund will buy the apartments at a discount of approximately 25 per cent from the developers and will target over 26 per cent IRR. Indiareit Apartment Fund will target apartments in Mumbai, Delhi NCR, Bengaluru, Pune and Chennai.

“This offering adds to our existing bouquet of services—i.e. structured equity, senior debt and construction finance and furthers our engagement with development partners to meet their requirements,” Jijina said.

The fund is specifically targeted towards those individuals who, beyond a primary home, look to invest directly into real estate as an asset class. The fund will therefore underwrite units only—i.e. physical square feet rather than financial participation, whilst adhering to the basic tenets of a defined use of funds, appropriate security and monitoring as well as ensuring developer alignment and project completion – key risks that a retail buyer in the open market would want to address.

(Edited by Joby Puthuparampil Johnson)

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