After investing in four mid-income and low-cost housing
projects in the past one year, Indiareit Fund Advisors Pvt. Ltd,
promoted by the Ajay Piramal group, wants to refocus its
strategy on projects with potential for higher returns.


Indiareit will now look at deploying most of its new
Rs500 crore domestic fund announced in October
in redevelopment and defunct textile mills projects.
“There are some 25 mills coming up for development

and we want to either bid independently or through a
special purpose vehicle,” managing director and

chief executive Ramesh Jogani said.
“Redevelopment projects, particularly in Mumbai,

also have great potential from an investment perspective,” Jogani added.
Indiareit’s revised strategy echoes the sentiments of

many private equity (PE) funds with a focus on real estate
in India. Funds that had zeroed in on the emerging, affordable

segment as a demand driver during the economic slowdown

believe that with the sector reviving, they should look at other
growth areas.
Among such funds are Kotak Realty Fund and

Saffron Advisors, which have lined up
about $400 million (Rs1,880 crore) and

$140 million, respectively, for investments.
Saffron Advisors’ founder and managing director
Ajoy Veer Kapoor said his company will seek value

in two sectors—warehousing chains and niche, city-centric

developments in Mumbai or New Delhi.
“We are not really looking at low-cost real estate projects
because it’s still at a very new stage in India and not many
developers have the bandwidth to pull it off,” said Kapoor.
The affordable housing story is a recycled version of the
integrated township story in India, which never really took off,

said V. Hari Krishna, chief investment officer at Kotak Realty Fund.
The fund last October picked up a 50% holding in an
affordable housing project of Janapriya Engineers

Syndicate Ltd, a Hyderabad-based builder.

“Such projects are mostly large, and so by the
time you recover your money, it takes a long time,” he said.
A 50-60-acre affordable housing project would

typically be sold and developed in phases and

take about five-six years to complete.
In the past 8-10 months, PE firms had reacted

what was then the need of the hour—financing
developers to complete projects and funding
projects that would sell quickly. Developers have
since raised funds from other channels and the

liquidity crunch has turned less severe.
In 2009, till October, realty funds invested

in 20 projects worth $867 million in special

purpose vehicles and property companies,

according to Venture Intelligence, which tracks

PE and venture capital deals in India.
More than half of these were in mid-income and affordable housing projects.
Two investment bankers, who advise real estate

clients on raising capital, said that with fresh
capital flows into new real estate projects still being tight,
developers depend on PE funds to raise equity for their ventures.
Funds are looking at investing in short-term,

small-format projects that will not take
more than three-four years to finish, said

Vinod Menon, head (real estate, investment banking) at

o3 Capital Advisors Pvt. Ltd, adding that investors
are also keen on offering last-mile funding.
“Unlike execution capital, this is to fund the last leg of

a project where the final interiors, etc., need to be finished,” he said.
Upbeat about the rebound in the sector,

PE fund Red Fort Capital Advisors Pvt. Ltd says
it is ready to put its money in greenfield projects right
from the land acquisition stage, on account of lower
land valuations now.
Red Fort, which wants to invest Rs1,000 crore
in the coming year, has in the past two months

invested Rs150 crore in an office development
project along with a developer.
First Indian Real Estate (FIRE) Capital Fund Ltd,
with a target investment of $100 million by end-2010,
wants to partner small developers or entrepreneurs

with no real estate background for large housing projects.
Developers who have raised money from realty funds

recently are hopeful of seeking their investments again.
Mumbai-based firm Orbit Corp. Ltd, which raised
about Rs175 crore from a PE fund for its 100-acre

gated community project in Mandwa, a beach location
close to Mumbai, is now in talks with two-three funds for

-format projects in the Mumbai metropolitan region,
said Pujit Aggarwal, Orbit’s managing director.
“Most developers need money now for investing in fresh
projects or who want a cashout from a current project to

get into a newer one. We want to raise funds for a few
mid-income and low-end housing projects and are
positive about the response,” said Nayan Bheda,

managing director of Neptune Developers Pvt. Ltd,

which got funding from Indiareit Fund for a low-cost
housing project in Mumbai last November.