Kotak Realty Fund plans to raise $350 million via foreign realty fund

Kotak Realty Fund plans to raise $350 million, or about Rs 1,866 crore, through a foreign real estate fund that will invest primarily in residential projects. This follows a series of successful exits from projects over the last one year, when it registered return on investments-or IRR, or internal rate of returns-of 32 per cent in exits worth $240 million, or about Rs 1,280 crore, a banking official said. "The immediate opportunity is in funding for developers who are looking at finishing their projects," the person said on condition of anonymity. Kotak Realty Fund recently exited its investment in an IT park in Goregaon, Mumbai, for Rs 385 crore. It had invested Rs 95 crore in the project in 2006. The new fund will be deployed over the next three years primarily in residential projects, both greenfield and brownfield. The fund will invest about $50-70 million, or approx Rs 265-370 crore, in individual greenfield projects and close to $30 million, or about Rs 160 crore, in the case of last-mile funding, the person said. Indian funds, especially first time funds, have been struggling to raise capital from foreign investors in the past one year. "The problem is not that capital is unavailable. Capital is available today, but foreign investors are willing to give money only to fund managers who have shown superior returns compared to industry benchmarks," says Anckur Srivasttava, chairman of GenReal Property Advisers. Kotak Realty Fund is showcasing its exits to raise new funds, the official quoted first, said. The fund is also expected to offer direct co-investment opportunity to its investors. Most private equity deals in the real estate space are expected to be structured transactions with preferred returns built in, after the Department of Industrial Policy and Promotion recently removed ambiguities over such transactions. Kotak Realty Fund is expected to get into preferred equity deals with developers, where the fund gets a preferred return of 16-18 per cent first, while the developer will share the rest of the returns with the fund.

source: http://www.realtyplusmag.com/rpnewsletter/fullstory.asp?news_id=17952&cat_id=1