Motilal Oswal Real Estate, the real estate arm of the Mumbai-based financial services firm Motilal Oswal, has launched its third private equity real estate fund with an INR 10 billion (€139.4 million; $154 million) target.
The residential-focused vehicle will target to raise capital from domestic high-net-worth investors and family offices. No closing has been announced yet.
The fundraising target for India Realty Excellence Fund (IREF) III is double than that of its predecessor, IREF II. Motilal closed on INR 5 billion for the fund, which was oversubscribed, in May this year.
The fund strategy, similar to its predecessor funds in the series, will focus on investing in structured mezzanine deals with property developers for the development of residential projects in key Indian cities. The National Capital Region of Delhi, Bangalore, Pune, Chennai and Hyderabad are among the cities earmarked for investments. The firm is targeting to deploy capital in a total of 12 transactions, with the deal size ranging from INR 800 million to INR 1.2 billion.
“The real estate sector is going through a consolidation phase and prices are expected to remain stagnant for some time. This is the correct time for investors to invest through indirect investing, as we participate in the project profits rather than banking completely on the future price rise,” said Sharad Mittal, director and head, real estate fund, Motilal Oswal Real Estate.
On the fund’s investment strategy, he added: “We shall continue to undertake structured mezzanine investments with established developers for their mid-income housing projects across top cities. Opportunistically, we shall also undertake structured equity investments depending on the market scenario.”
The firm is targeting to generate 23 percent to 25 percent internal rate of return (IRR) from the investments made via the fund, which will have a life of five years.
India Realty Excellence Fund II (IREF) was launched in November 2013 with an initial target of INR 3 billion. In March this year, the fund reached a first close of INR 2.2 billion and a final close of INR 5 billion in May. Close to 80 percent of the capital has been deployed so far, with plans to fully invest by January next year.
The INR 2 billion IREF I, launched in 2008, has been fully invested in seven residential investments. So far, around 80 percent of the fund has been divested, generating a 20 percent gross IRR.