Sebi nod for 13 realty VC funds

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New Delhi, 19 Sept: Sebi has approved 13 venture capital (VC) funds to invest in real estate in India. Another 3-4 are awaiting approvals.

Such funds are expected to bring a large volume of formal national and international funds into realty acquisition and development. The move began in April last year when the government allowed VC funds to invest in realty and FDI was allowed in the sector this year.

This could be a first step towards realty MFs and Real Estate Investment Trusts (REITS), which have been mobilising huge resources across Asian markets, including Thailand, Philippines and Singapore. They invest in realty assets like distress properties, NPAs of banks and FIs and large scale developments.

Venture funds promoted by ICICI, HDFC, Kotak, and Pantaloon and foreign funds with NRI components such as Solitaire Investments have already started building a portfolio of commercial realty that have established tenants.

Since lease tenures are normally for 3+3+3 years, well-tenanted properties fetch assured 5-6% returns over nine years. There is also a 10% escalation in lease values every three years, therefore, secured returns for nine years are a lure.

Investment funds are financing the purchase and development of premium properties. This includes Emaar properties of Dubai, which has brought in Rs 800-crore investment in a property in Hyderabad to be developed with MGF. ICICI Ventures has also tied up with Tishman Spears of the UK, where ICICI Ventures picks up the property and Tishman gets the first right to develop the property.

Explains Sanjiv Ahuja, CEO of Solitaire Capital Advisors Pvt Ltd, Solitaire Capital India, “The funding comes from three sources - domestic institutional investors and banks, which account for 50-60% of the funds raised, corporate houses and high networth individuals which account for 20-30% of the investment and NRIs and PIOs who account for another 20%.”