Mumbai-based asset manager IDFC Alternatives has held the final close for it first real estate fund just 10 weeks after launching, hitting its target of INR 7.5 billion (€89 million; $122 million). The capital has come from domestic institutions and high net-worth individuals, according to a firm statement.
IDFC held a first close on approximately $60 million for IDFC Real Estate Yield Fund last month, PERE reported earlier. The fund is structured as a debt fund that will focus on residential developments in the cities of New Delhi, Mumbai, Chennai, Bangalore, Hyderabad and Pune in need of “last-mile completion financing,” according to the firm’s chief executive MK Sinha.
IDFC’s fund is rupee-denominated, and the firm secured its capital from a total of approximately 100 domestic investors, primarily family offices and high net-worth individuals, all of whom are new to IDFC funds. IDFC is also expected to offer co-investment opportunities to the larger investors.
The firm has so far invested INR1.23 billion in two residential projects in Pune and Bangalore with capital from its balance sheet, which it has now transferred to the fund to give it some seed assets and minimize the J-curve, according to the statement.
“The real estate sector is going through a tough phase in the backdrop of a market slowdown and most developers are stretched with reduced cash flows,” he explained. “This is the right time to plough money into the sector and structure transactions that will provide high yields going forward.”
Overall, IDFC will target a high teens to low twenties percentage IRR from the real estate fund over a 4-year fund life. As of now, IDFC has built up a pipeline of approximately 20 deals, Sinha said.
IDFC’s foreign direct investment-compliant commingled fund has not received as warm of a response from international investors, however. The firm officially launched that fund with a $500 million target in July, but has since considered lowering the target to $300 million and structuring the vehicle as more of a club or joint venture with a view to better enticing investors. Sinha said IDFC has put capital raising for that fund on hold until after the country’s elections next month are over.
With a total of INR 144 billion assets under management, IDFC Alternatives is a wholly-owned subsidiary of Indian infrastructure finance corporation IDFC, and is best known for its infrastructure investments. However, in the past few years the Alternatives arm has also branched into private equity and real estate.