AB Financial Services plans Rs 1,000-cr realty fund

Source:22 Apr 2010, 0318 hrs IST,Sobia Khan,ET Bureau




BANGALORE: Aditya Birla Financial Services, promoted by the Aditya Birla Group, is launching a real estate fund at a time when realty companies are finding it difficult to raise money through traditional routes. The firm expects to raise Rs 1,000 crore from investors in the next six months.

The optimism stems from a rebound in the real estate market. “Markets across the country have begun the ‘upward phase’ of another cycle and the fund will allow retail investors to gain from the opportunity of investing in the Indian real estate sector,” said Shashi Kumar, head, real estate investment advisory of Birla Sun Life Asset Management.

The proposed fund to be called Aditya Birla India Real Estate Fund-I, will have a greenshoe option of Rs 250 crore, and will be advised by the group’s asset management arm, Birla Sun Life Asset Management.

An individual has to invest a minimum of Rs 25 lakh, while an institutional investor needs to put up at least Rs 10 crore. “The prime aim of the fund is to enter an investments at the stage of land cost and ensure adequate control, monitoring and review of such investments,” added Mr Kumar.

The fund will be invested in special purpose vehicles created by realty firms to implement projects. Despite a modest recovery in the market, realty firms have found fund raising an arduous task.

Banks have tightened lending norms, while the IPO market is not fetching them the valuation they want. The last two IPOs, Godrej Properties and DB Realty, received a lukewarm reception from investors at the time of listing. Nitesh Estates, a Bangalore-based firm, was forced to cut its IPO price in order to attract investors a few days ago.

The real estate fund will be invested into equity and, debt instruments of investee companies engaged in residential, commercial, retail malls, and other real-estate development projects in cities such as Mumbai, Pune, Chennai, Bangalore, Delhi, Kolkata and Hyderabad.

“Nearly 75% of the corpus of the fund will be invested in the residential space,” he added. The fund may also consider an anchor or cornerstone investor on a case-to-case. “The fund will share its profits with the investors in a ratio of 80:20 with the majority being given to the investors and the rest to the investment manager,” said Mr Kumar.