ASK Property Investment Advisors (ASK), the real estate arm of Indian financial services company ASK Group, has raised INR 5.35 billion ($83 million; €71 million) for the first close of its latest real estate fund.
The firm launched the ASK Real Estate Special Situations Fund I (RESSF I) in January this year targeting INR 10 billion from domestic investors. The firm will structure its investments as preferred equity with a maximum term of five years.
The investments will be made to developers to repay existing lenders, and to be used as working capital for the completion of development projects. The firm will make investments with a ticket size between INR 1.5 billion to INR 2 billion and seeks a return of 20 percent.
The firm will invest in mid segment and affordable residential projects and the investments will be secured by the project, the land and the cashflow.
“Currently developers’ balance sheets as well as individual projects are facing cash crunch. Our strong research team identifies bankable projects that need this capital,” said Amit Bhagat, managing director and chief executive officer, ASK Property Investment Advisors.
“In our view, focus on construction and project completion coupled with declining home loan interest rates will revive residential real estate demand leading to an improvement in cash flows sufficient to generate returns,” he added.
Aligned with the firm’s other domestic real estate funds, the firm will continue to focus on the top 6 cities: Mumbai, Delhi-NCR, Chennai, Bengaluru, Pune and Hyderabad, according to Bhagat, who added that the firm is expected to make its first investment from the fund within the next two months.
In India, there is a growing interest for real estate investment managers to provide refinancing solutions to real estate development projects that are close to completion. Recently, Piramal Fund Management also lent over INR10 billion to real estate developers Wadhwa Group and ASF Group to repay their existing loans.
In May 2016, ASK closed ASK India Real Estate Special Opportunities Fund, its first offshore blind-pool real estate fund at $100 million, which was less than half of the initial fundraising target.
The decision to close the fund short of its original target was made in response to demands of existing investors in the fund due to a prolonged two-year fundraising period, PERE previously reported. The investments of the offshore fund are also structured as preferred equity. The firm has deployed around 20 percent of capital from the fund in two projects to-date.