Motilal Oswal Real Estate, the real estate investment arm of Motilal Oswal Private Equity Advisors Pvt. Ltd, plans to invest Rs.1,000 crore in residential projects in 2016-17 and has signed the first transaction from its new fund, said a top fund executive.
Of the Rs.1,000 crore, Rs.700 crore will be deployed from its new India Realty Excellence Fund III (IREF-III) and the remaining Rs.300 crore from the so-called discretionary portfolio management service offering (where the portfolio manager decides where to invest).
Motilal Oswal Real Estate started raising IREF-III, a Rs.1,000 crore fund, to primarily invest in residential projects, last November and has achieved the first close of Rs.525 crore.
“We plan to raise the remaining amount in the next six months. The fund is expected to be fully deployed in the next 18 months,” said Sharad Mittal, director and head, real estate investment, Motilal Oswal Real Estate.
From the new fund, it has closed the first deal and has invested Rs.58 crore in Kolte-Patil Developers Ltd. The money, which is in the form of debt and equity, will be used to buy a 3.5 acre land parcel in Wakad, Pune, for a mixed-use development project, combining residential, commercial office and a small retail component.
Private equity (PE) investments in residential projects have remained robust even in difficult times for the real estate sector. According to data from VCCEdge, which tracks investments, PE funds in 2015 invested nearly $2.77 billion in real estate projects and companies across 81 deals, against $2.1 billion in 2014 through 90 deals.
“We plan to undertake mezzanine transactions with established developers across top cities and are focused to generate superior risk-adjusted returns for our investors,” said Mittal.
Mezzanine transactions are primarily those which combine debt and equity capital.
From IREF-II, its second fund with a Rs.500 crore corpus, Motilal Oswal Real Estate has exited its investment from Mahaveer Developers. It had put in Rs.62 crore in 2014, across two tranches, and has exited with 30% internal rate of return (IRR).
“The real estate vertical has become one of our key vertical within the overall private equity business. Motilal Oswal Private Equity now manages more than Rs.3,000 crore across five funds spread across growth capital and real estate,” said Vishal Tulsyan, managing director and chief executive, Motilal Oswal Private Equity.