With RBI imposing restrictions on funding of land acquisitions, smaller developers are finding it tough to raise funds and kick off their projects. So, in a first-of-its-kind initiative, the promoters and builders community of Pune have got together and launched their own realty fund as an alternative option for those wanting to raise equity funds.
The Promoters and Builders Association of Pune?s (PBAP)?s Realty Fund takes off with a small corpus of Rs 26 crore but aspires to be a billion-dollar fund in three years time. ?The fund has been set up as a separate vehicle that can grow to manage larger funds and eventually can even consider getting listed as a mutual fund in terms of Sebi guidelines,?? Lalit Kumar Jain, President PBAP said. The fund is talking of 25% ROI.
Rohit Gera, secretary of PBAP, said foreign funds are available only to large developers and domestic funds too did not look at small developers, so there clearly was a gap in the market, which they floated the fund.
The first series of Rs 26 crore will be a close-ended seven year fund and invest up to Rs five crore in a project. Jain said the next round could be about Rs 200 crore to Rs 300 crore and could reach the Rs 4,000-crore mark in three years.
The PBAP Realty Investment Fund has been created by investments from its own members and it is for the first time in the country that an association has created a realty fund. PBAP has a membership of 250 and accounts for 65% of the sanctioned work in Pune. This first series has been fully subscribed by about 84 of the PBAP members and no external funding has been taken.
Ranjit Naiknavare, MD of the SPV set up to manage the fund, said that in addition to the equity participation, the presence of the PBAP investment would also help in obtaining debt financing for construction – the cost of these funds from institutions is far lower than the private debt markets. The SPV would pick up between 26% and 50% in the project.
The realty fund will first focus on Pune, then Maharashtra, and later western India, and this model can be repeated elsewhere in the country, Jain said.
