IIFL Asset Management, part of the India Infoline group, plans to raise $500 million under its India Housing Fund to make debt investments in real estate including stressed projects.
The company is looking at both domestic as well as international investors through a feeder fund. IIFL has raised more than Rs 6,000 crore in the last five-six years for real estate investments in addition to proprietary investments. The company has exited the first two funds raised in 2012 and 2013, to the tune of Rs 1,200 crore at a gross return of 19.1% and 18.6% respectively.
Abdeali Tambawala, partner & fund manager, IIFL Asset Management, said that the fund would be making project-level funding and not the real estate entity. The fund would look at opportunities in affordable housing driven by urbanisation and supported by government schemes such as Pradhan Mantri Awas Yojana to boost rural housing.
It would also look at funding takeover of distressed projects by stronger developers. "We are seeing consolidation. Larger developers are seeing opportunity in taking over projects. We are working on a few transactions and have several projects in the pipeline," said Tambawala.
He said the fund would diversify its exposure across 15-20 projects with an average exposure of around Rs 100 crore per project.
The company expects to generate a return of 18-20% on the gross side and generate returns in the range of 12-13% for investors after factoring in fees, profit share and tax. Although there was risk in real estate projects, IIFL would focus on projects where it would have at least twice its exposure as collateral. This would mitigate the risk, said Tambawala. Although the tenure of the fund is five years, IIFL would look to return most of the investors money in four years.
Since the fund would be raising money through issue of debentures there was no restriction on foreign investments. The minimum investment size is Rs 1 crore and expect participation from domestic individuals, non-resident Indians and institutions including insurance companies.