India Realty Fund-1, managed by Azure Capital Advisors Pvt Ltd, is raising a Rs 500-crore rupee-denominated private equity fund, which will track investment opportunities in "byte-sized" real estate developments in India's southern and western markets.
The fund will essentially be focused on urban conglomerations where the knowledge economy is expanding and on re-developments of smaller residential societies in Mumbai.
The fund will focus on equity investments of up to Rs 35-40 crore each in small to mid-sized residential projects. These could be new joint developments and re-developments on land parcels of 5 to 10 acres in metros as well as in tier-II and tier-III cities.
"The first close of India Realty Fund-1 at around Rs 150-200 crore and is expected towards end of September. The first close will be mainly through retail investors, HNIs and family offices. This will be a seven-year (six plus one) close-ended fund," Shailesh Ghorpade, MD & CEO of Azure Capital Advisors told VCCircle. Ghorpade came in from Suzlon Energy where he was the chief strategy and planning officer.
The minimum ticket size for retail investors was pegged at Rs 5 lakh with the fund projecting 20% plus IRR on compounded annual growth rate basis from the fourth year onwards. "We will also offer our ultra-HNI investors an option to co-invest (where they can directly invest along with the fund) in some of our larger developments," Ghorpade added.
The shareholders of the fund management company, Azure Capital Advisors, will be investing about Rs 18-20 crore in the fund. Besides Ghorpade, Azure Capital Advisors is spearheaded by Executive Director Alok Kumar Singh (formerely with QVC Realty and Infosys Technologies Ltd), Deepak Kumar as Chief Investment Officer (with Bain & Co previously), Deepak Salvi (who was with Urban Infrastructure Opportunities Fund) and Chinnu Senthilkumar (formerly country head of SanDisk).
Azure and India Realty Fund have roped in former MHADA chairman and housing activist Chandrasekhar Prabhu as chief mentor, a move that will in someways help them to leverage on his ties with over 7,000-odd building socities in Mumbai that are potential targets for re-development. "We believe the tenant associations are more likely to trust a fund like ours, than developers. And people like Prabhu have worked with them over several years, and this should open up some doors for us in the Mumbai re-development story," Alok Kumar Singh said.
"Many of the existing building societies have FSI of 1:1, which is now being raised to 2.5/3. In any re-development project, we will share a part of the new FSI with the societies, or go in for profit sharing on the newly permissible development," he explained. It is estimated that Mumbai hasd over 40,000 dilapidated buildings that are in need of re-development.
Several real estate developers and funds have focused their attention on the city's re-development with Unitech being in the market to raise a Rs 300-crore towards re-development of Mumbai.
On the new residential projects in other cities, mainly in south, the fund will be tracking the expansion of the knowledge (read IT and ITeS) firms into newer locations such as Mysore, Mangalore, Thiruvananthapuram, Salem and Coimbatore. This will not prevent the fund from cracking investment opportunities in existing knowledge hubs like Bangalore, Pune and Chennai.
Azure Capital Advisors is in discussions with a few IT firms for a preferred vendor status, as this would help the firm in attracting potential customers from the sector, Ghorpade said. The fund management firm is coming up with a services arm as well, which will offer end-to-end work beginning with masterplan development to marketing and sales mostly in projects where India Realty Fund-1 will have controlling stake or voting rights. "The main aim of the services arm will be to work on projects efficiently and deliver them on time, which will significantly boost return on investments. This underlines the fact that we are an execution focused fund rather than a finance focused one," Singh added.