Indiareit to raise Rs 200 cr for fifth domestic realty fund

Scales down offshore fund size from Rs 2,720 crore to Rs 1,632 crore; also plans second re-development fund for the Mumbai market

Indiareit Fund Advisors, the private equity (PE) arm of Ajay Piramal's Piramal Enterprises, is looking to raise around Rs 200 crore over the next three months for its fifth domestic real estate fund. The domestic fund has a total corpus of Rs 750 crore with an option to expand it by Rs 250 crore, if need be.

Last year, Indiareit raised Rs 50 crore for the fifth fund. It now looks to raise the remaining (Rs 500 crore) by March 2014, said Khushru Jijina, managing director of Indiareit. Of the company's fourth fund of Rs 890 crore, only Rs 70 crore remains to be deployed, he added.

Indiareit is also planning to launch an offshore fund of $300 million (Rs 1,632 crore) next month from investors from Europe, Asia and Australia, said Jijina. Indiareit, which manages assets worth Rs 4,220 crore, had earlier planned to raise $500 million (Rs 2,720 crore) for the offshore fund, but it scaled down the fund corpus.

"We think $300 million is better in the current market conditions. Since we have good track record, we can raise higher amount, but since we focus on prudent deployment and good returns, we are settling for lower size," he said.

The last time Indiareit raised an offshore fund was in 2006. This is for the first time the fund manager is tapping the Australian investors. According to consultants, raising domestic money would be easier than raising offshore fund for Indiareit.

"Domestically, they are a well known name; they've delivered good returns and their distribution is very good. But raising an international fund for Indian properties is challenging for all fund managers including Indiareit," said Ambar Maheshwari, managing director (corporate finance) at Jones Lang LaSalle (JLL).

Jijina said Indiareit will launch another fund aimed at investing in re-development projects in Mumbai in April 2014, after exhausting its current fund called the Mumbai Redevelopment Fund, from which it invested Rs 100 crore recently.

"We will keep it around Rs 400 crore to Rs 500 crore so that we can invest between Rs 80 crore to Rs 100 crore and launch the next fund," he said. According to JLL's Maheshwari, the redevelopment fund is a good move, given that redevelopment projects in large cities are a lucrative business.

FUND FACTS

* Indiareit domestic real estate fund has a total corpus of Rs 750 crore with an option to expand it by Rs 250 crore

* It is also planning to launch an offshore fund of $300 million next month from investors from Europe, Asia and Australia

* Indiareit had earlier planned to raise $500 million for the offshore fund, but scaled down the fund corpus

* The new re-development fund will be launched in April 2014 after exhausting the current fund from which it invested Rs 100 crore