Essel Finance to launch $100-mn Shariah fund

Is looking to forge partnerships with Shariah funds by February-March

Essel Finance, the financial services arm promoted by media tycoon Subhash Chandra's Essel Group, is planning a Shariah fund for foreign investors in real estate. The Shariah fund will have a corpus of $100 million (Rs 620 crore).

“You cannot directly have a Shariah-compliant fund in India. Hence, we are taking the help of Shariah-compliant fund houses in Malaysia and West Asia,” said Amit Goenka, chief executive officer, Essel Financial Services.

The fund is looking to close the fund forge partnerships with Shariah funds by February-March. Goenka said the Shariah partner would offer the fund on its behalf and once the company gets its licence for the offshore fund it was planning, it would bring the Shariah component under its fold. Interest in Shariah funds is growing in the country.

According to a recent Bloomberg report, Taqwaa Advisory and Shariah Investment Solutions, a Mumbai-based consultancy, is setting up a Rs 250-crore fund on behalf of a company backed by the Kerala government. Secura Investment Management manages the country’s only other such real estate vehicle. India has two Shariah equity funds and the BSE introduced a new Islamic share index on May 2 last year, Bloomberg said.

Shariah is Islamic law which talks about many aspects of a Muslim's life, including investments. For instance, the payment or receipt of interest is considered unjust.

Essel's offshore vehicle may also get its investors to directly invest in real estate projects here and not route it through the fund. The offshore fund has planned a corpus of $200 million.

Essel is looking to invest Rs 350 crore from its domestic fund in the next six weeks in various cities, including Delhi, Bangalore and Mumbai. It has invested a total of Rs 135 crore in projects of realty developer Aristo in the Vile Parle area of Mumbai and Parvsnath's Exotica project at Golf Course Road in Gurgaon.

Its domestic fund does debt deals and charges developers with coupon rates of 18 to 19 per cent.