Exclusive: IIFL Asset Management hits final close of latest real estate fund

IIFL Asset Management, a part of IIFL Wealth Management Ltd, has hit the final close of its latest real estate fund, a top executive told VCCircle.

The firm had launched India Housing Fund in late 2017 and hit the final close a few months back. “We have raised $300 million (Rs 2,144 crore at current exchange rate) for our latest fund, raising roughly $100 million from offshore investors and the remaining from domestic limited partners (LPs),” said Abdeali Tambawala, fund manager, real estate, IIFL Asset Management.

With India Housing Fund, the firm reached out to foreign institutional investors for the first time while it has scooped up capital from offshore high net worth individuals (HNIS) for its earlier funds.

Fairfax India, an India-focused investment firm anchored by Canada’s Fairfax, is one of the offshore investors. It has committed around $25 million or a fourth of the offshore corpus, it is learnt.

Meanwhile, the India Housing Fund has already deployed roughly $113 million across a bunch of transactions in the country. “We typically structure our deals in the form of debentures, targeting returns in the range of 17-20%,” Tambawala said.

Several media reports had previously said that the fund had a target corpus of $500 million.

In its latest deal, the fund has given Rs 100 crore to an unnamed developer. “We continue to evaluate transactions and have already completed half a dozen deals under the fund. Given the market sentiment, we are more active, alert and cautious in the investment process with an aim to cover all loose ends,” he said.

The development comes at a time when the real estate market is going through tough times. The liquidity crisis is all-pervasive and non-banking financial companies (NBFCs) have virtually stopped lending to the sector.

Until the first half of the last year, NBFCs were the main source of capital for real estate with developers getting multiple rounds of funding from these institutions. The liquidity squeeze after the IL&FS fiasco has turned the sector upside down. To add to the trouble, sales have been under pressure for a long time.

While debt funding has been tepid, a clutch of real-estate-focused private equity firms have managed to scoop up capital and make investments with a cautious stance.

Recently, Motilal Oswal Real Estate, the real estate investment arm of Motilal Oswal Group, hit the third close of its fourth fund at Rs 1,050 crore ($145 million). The domestic fund has a target corpus of Rs 1,500 crore.

HDFC Capital, the real estate private equity arm of HDFC Group, had raised offshore money for its funds HDFC Capital Affordable Real Estate Fund 1 (H-CARE 1) and HDFC Capital Affordable Real Estate Fund 2 (H-CARE 2). It is one of the few firms in the real estate space which has managed to scoop up capital from offshore markets in the last few years.

Both funds collectively have a corpus of $1 billion targeted at affordable housing projects in the country. The primary investors in the H-CARE funds include a wholly-owned subsidiary of the Abu Dhabi Investment Authority (ADIA) and the National Investment and Infrastructure Fund (NIIF).

IIFL Real Estate

IIFL Asset Management in total has raised $1 billion across eight real estate funds so far. Its first two funds – both had a target corpus of $100 million each – have been fully exited and capital has been returned to investors. Tambawala said that the firm has given money back with annualised returns in the range of 18-19%.

Other funds of the firm are at different stages of investment and exit.

The firm has exited half of its investments in its last real estate fund – IIFL Yield Enhancer Fund -- which wrapped up fundraising in 2016.

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VCCircle