Motilal OswalNSE 4.26 % Real Estate (MORE), the real estate private equity arm of Motilal Oswal Financial Services, has achieved the second close of its fourth real estate fund – India Realty Excellence Fund IV (IREF IV) – with commitments totalling Rs 850 crore.
It has raised funds mainly from high-net-worth individuals and family offices.
“We have raised Rs 850 crore for the fund within eight months of launch. In this fund, we have witnessed repeat commitments from existing investors from our previous funds,” said Sharad Mittal, CEO, MORE. The target is to raise Rs 1,200 crore through IREF IV, he said.
Currently, MORE’s cumulative assets under management (AUM) stand at more than Rs 3,000 crore. It has invested capital in the real estate sector through four real estate funds, portfolio management services (PMS) and proprietary investments. It has also seen exits worth around Rs 1,000 crore from 13 investments across its first three funds in the past two years.
The company’s strategy for IREF IV is an extension of its investment strategy for IREF II and IREF III funds. It plans to deploy the capital in mid-income and affordable residential projects across India’s top six cities and also selectively invest in commercial projects.
“We have scaled up the real estate private equity business by more than 10 times in the past five years,” said Vishal Tulsyan, managing director of Motilal Oswal Private Equity (MOPE), the alternative investments platform of Motilal Oswal Group, of which MORE is a part. “We believe that the sector is at the cusp of transformation led by regulatory reforms and investing in this segment shall continue to be our focus in the coming years.”
The cumulative AUM under MOPE is more than Rs 6,700 crore.
Through IREF IV, MORE has already committed Rs 250 crore in four investments in Chennai, Pune and Hyderabad.
According to Mittal, the fund’s strategy of partnering with large developers in their mid-income and affordable projects, with focus on top six cities, has worked well in the past and it plans to stick to this strategy.
However, he said, the fund will be cautious and selective while finalising investments given the current market scenario despite the significant increase in deal flow over the past few months.
MORE has so far focused on investing in projects of established developers in each micro-market by providing them capital for early-stage investments. It has invested in projects of developers such as Chennai’s Casagrand Group, Bengaluru’s Shriram Properties, Hyderabad-based Phoenix Group, Pune’s Kolte Patil Developers and Delhi-National Capital Region’s ATS Group. The fund has executed several transactions with these developers through its four funds in the past few years.
“We have a strong pipeline of deals for our fourth fund and expect to completely deploy the fund in FY20,” said Mittal.
There is huge pent-up demand in the mid-income and affordable category, he said, and the structural reforms introduced and slew of benefits given by the government with a focus on affordable housing will fuel growth in the sector.
Mittal said the next cycle of growth in the sector would be led by affordable housing and that he expects to witness a high degree of consolidation which will ensure that only large and professionally-managed developers survive.