Domestic realty funds launch stressed funds to tap opportunities

When sales are very low and financing from banks and non banking finance companies are not coming, fund managers are expecting good returns from their investments, experts say

Sensing opportunities from stalled real estate projects and cash starved developers, home grown fund managers are launching stressed asset funds.

When sales are very low and financing from banks and non banking finance companies are not coming, fund managers are expecting good returns from their investments, experts said.

On Monday, fund manager Lumos Alternative Investment Advisors said it has tied up with some prominent real estate developers in the country to launch its maiden Rs 300 cr stressed-assets- focused real estate fund.
 

The proposed fund will focus on last-mile funding and acquisition of stressed residential and commercial projects in six major cities with an investment ticket size of Rs. 20-40 cr per transaction.

Anuranjan Mohnot, Managing director and CEO of Lumos Alternate Investment Advisors said it is an experiment where real estate developers will join hands with an asset management company at an early stage to create a better eco system of fund raising when liquidity support from major financial institutions and NBFCs has dried.

" Stressed assets acquisition being more of operational play real estate developers, as operating partners in the acquisition of stressed assets and last-mile funding, will provide a unique win-win investment opportunity to investors where operational risk is mitigated through active participation," Mohnot said.

Mohnot said this would better visibility of financial closure, execution and exits. The operating partners will invest in the fund and the projects to have proper skin in the project.

Mumbai based Nisus Finance has also got commitments from Investors for a Rs 500 crore fund to invest in distressed assets stuck with NBFCs or projects which need last mile funding, said Amit Goenka, managing director and chief executive at Nisus Finance.

"We are looking at projects which are stuck due to lack of funding or where management is weak," Goenka said.

Goenka said they are also curating a portfolio of stressed commercial assets Rs 200 crore to Rs 300 crore.

"Many such assets have come to us in April and May. Rents are under pressure and many LRDs (lease rental discounting ) are looking for refinancing," he said.
 

Vishal Srivastava, President – Corporate Finance, ANAROCK Capital said  sales have been lacklustre because of buyers’ increasing preference for ready-to-move or almost completed projects." By the same coin, sales will pick up once the project nears completion. Many existing buyers have bought units with construction-linked payment plans. Because the project is stalled, they’re not making any further payments. The developer’s ability to service debt has depleted and the project is now categorised as a non-performing asset (NPA)," he said.