Real estate portfolio management services (PMS) deals are picking up pace as high net worth individuals (HNI) look beyond equities .
Industry sources said Birla Sun Life Asset Management Company(AMC), Anand Rathi, ICICI Prudential AMC and Enam are among companies that have entered into deals in this space. Unlike in 2008, when interest was concentrated in the commercial segment, most fund managers are believed to be focusing on the residential segment, this time.
Aditya Birla Real Estate PMS has raked in Rs 490 crore for residential projects. Anand Rathi?s PMS recently raised about Rs 250 crore to invest in commercial property. From the supply side, even developers, especially the mid-sized ones, are looking for alternative sources of funds as funds from banks has dried up.
These funds invest like a venture capital (VC) fund, set up as a trust. They invest in live projects through a special purpose vehicle (SPV) between the builder and the investment advisor (who acts like a fund manager).
The minimum ticket size is usually Rs 25 lakh and funds can invest anywhere between four-10 SPVs. These funds are typically closed-ended with a lock-in period of five-seven years.
There are some challenges in its product structuring, feel experts. ?You lose control over the exit price, since the fund manager sets the exit criteria and the selling price,? said Sandip Raichura, business head, wealth management, PINC Money. Some experts expect it to be a good long-term investment alternative.
?It?s a recent phenomenon and is picking up as it gives an opportunity to benefit from realty appreciation of handful of properties at a fraction of the cost,? said Anuj Puri, chairman and country head, Jones Lang LaSalle Meghraj.
PMS investors, as opposed to those buying properties directly, do not have to go through the hassle of doing the due diligence or executing the transactions themselves.
PMS generally aim to generate 20% internal rate of return (IRR), but there is no guarantee of returns. In fact, PMSs launched in 2008, focusing on commercial space, have performed badly. PMS also charges fund management charges of 2% per annum, often laced with profit sharing arrangement.