Home grown property funds are increasingly raising credit funds as banks are lending only for selective purposes and lending by non bank lenders yet to pick up after the NBFC fund crunch started post the IL&FS crisis in 2018.
Over Rs 6,000 crore of funds have been launched or raised by the likes of ASK, Motilal Oswal, Sundaram Alternates among others.
On Monday, property fund WSB Real Estate Debt Fund said it has raised over Rs 850 crore through its current fund, surpassing its initial target commitment of Rs 500 crore, the fund manager said today.
The fund called WSB Real Estate Debt Fund II (WSBREDF II,) has already invested in dozen real estate projects. It invests in mid-income and affordable housing segments within select Tier I cities.
In the present fund – WSBREDF II, over two-thirds of the fund is deployed across 12 transactions, securing two exits with ~23% gross IRR said. Kaushik Desai, managing partner and investment committee member of WSB.
The fund aims to fund post approval purposes and refinancing loans. Experts said the domestic fund managers are looking at deals below Rs 250 crore as global fund deals above that.
“Domestic funds are raising money to get good credit transactions in the market”, said Vishal Shrivastava , executive director at Anarock Capital, a real estate focused investment banking firm.
The Indian real estate debt market is Rs 1 lakh crore and domestic fund managers deploy Rs 2500 to Rs 3000 crore every year, Shrivastava said.
“Since they invest just 2.5% -3 % of total market, there is huge opportunity to lend. Since NBFC money is not coming, there is no option than going to credit funds,” he said.
Global funds such as PAG, Ares, Oaktree and others have done large deals in the past from refinancing old loans to help them buy land parcels. Experts expect that these funds have invested about $5 billion in Indian real estate in last four years post IL&FS crisis.
The WSB fund was raised capital from a diverse group of investors, including family offices, large corporate houses and domestic as well as offshore high-net-worth individuals (HNIs), it said.
The fund has invested in Bollineni Group, Shapoorji Pallonji and Jain Housing. partnerships, Desai said.
“More than 12,000 homes were developed/delivered through our portfolio in the last 4-5 years across over 40 projects” Desai of WSB added.
WSB Real Estate Partners has managed and committed over Rs 2,000 crore of debt capital to the residential real estate space. The fund has done over 40 real estate transactions, the group has already achieved exits/partial exits in more than 75% of transactions, it said.