IDFC Alternatives raises Rs 475 crore through realty fund
MUMBAI: IDFC Alternatives, the asset management arm of infrastructure-focused lender IDFC, has raised Rs 475 crore under its real estate focused IDFC Score Fund, said a top company official. The five-year fund will be investing in residential projects across top seven property markets, including Mumbai, Delhi-National Capital Region, Bengaluru, Pune, Chennai, Hyderabad and Kolkata.
The fund is looking to invest only in projects that have secured approvals and are aiming for gross annualized returns of 20-21%. Under its third fund, IDFC’s private equity arm is looking to raise total Rs 750 crore and plans to deploy it through structured debt in mid-income housing projects with senior charge on cash flows.
“Real estate market is slow now and developers are looking for flexible financing support, but banks and non-banking financial companies cannot provide that. We see a healthy deal pipeline for prospective investments and have already started discussions for deployment,” said Ritesh Vohra, partner, Real Estate, IDFC Alternatives.
IDFC Score Fund was launched three months ago and Vohra expects to conclude total fund raising by July, given the commitments received so far.
The fund will have a fixed tenure of five years and no extension options as IDFC Alternatives is looking to deploy and make exits in stipulated time. “We will be offering structured debt financing with fixed tenure to developers and would be looking to exit as per the plan with no possibility of delay. We will be assuming lower risk by entering into projects only after the developer secures permissions,” Vohra said.
In 2014, the private equity fund had raised Rs 750 crore through its second fund The IDFC Real Estate Yield Fund. It has already returned Rs 210 crore through 26 monthly distributions to its investors, Vohra said, adding that nearly half the money raised so far under IDFC Score (Structured Credit Opportunities in Real Estate) Fund is from existing investors.
The IDFC Real Estate Yield Fund has committed its entire corpus with real estate developers such as Kolte-Patil, Rajesh LifeSpaces and NCC Urban amongst others.
The fund’s first offering, which was a proprietary fund with corpus of Rs 700 crore, focused entirely on investing in office properties. Raised in 2011, the IDFC Proprietary Office Fund has made complete exits from its investments by 2014, generating a 22% internal rate of return (IRR).
According to Vohra, the fund has already identified few opportunities for investments and has started initial talks for the same with respective developers in Pune, Bengaluru and Hyderabad. “We will be able to conclude these by the time we finish our fund raising efforts,” Vohra said.
IDFC Alternatives, multi-asset class investment manager with infrastructure and real estate exposure, has total assets under management worth Rs 17,000 crore, of which its real estate is about Rs 2,000 crore.
The revival in interest among private equity investors, especially in real estate sector, witnessed over the past one year is continuing into this year as well. Both domestic as well as foreign institutions have been looking to invest in the property market. Several Indian private equity players have been raising capital from global investors to invest in various sectors including real estate.
Foreign private equity players have a large appetite for commercial office space as it comes with lower associated risks and higher yields, whereas domestic players appear to be betting big on residential projects of reputed developers.