Motilal Oswal (MO) Alternates, the alternative investments arm of the Motilal Oswal group, has started discussions on its seventh real estate fund after raising Rs 2000 crore from its sixth fund recently.”Discussions have started on the seventh fund. We are discussing whether it will be similar strategy (like sixth fund) or commercial properties” said Anand Lakhotia, managing director and co-head of real estate at MO Alternates.
Previous Fund
The group’s previous fund, Indian Realty Excellence Fund VI (IREF-VI), was for pre-approval stage financing in real estate including land purchase and related expenses. After banks and non-banking finance companies had been barred from funding land and approval related debt, many including Motilal Oswal, ASK and others launched funds for pre-approval financing.
Lakhotia said if the seventh fund is launched with a similar strategy, it will be bigger than the sixth fund. For a different strategy, the company will look at a smaller size.
Sixth Fund
The sixth fund has deployed 65% of its corpus and the fund manager is looking for deploy the remaining 35% in the next 3-6 months, Lakhotia said “About Rs 425 crore is co-invested with our investors and we are looking at similar amount of co-investments (for the seventh fund),” Lakhotia said.
In each of the major cities, MO Alternates is looking at Rs 300-500 crore of investment, Saurabh Rathi, managing director and co-head of Real Estate at the company said. Rathi said the company took 14 months to raise the sixth fund as against 18 months for fourth fund which had similar strategy of pre-approval financing.
“The way wealth is growing in the country and our wealth management business is growing, the time taken to raise funds will further go down,” he said.MO Alternates has already done its first exit from IREF VI, delivering an internal rate of return (IRR) of 20.25% and looking at a overall IRR of 20% from its sixth fund.
On the fall in property sales, he said after a bull run of three years, prices are steady and volumes have stabilised. “Prices are steady now and rise is inflation linked which is good for the markets,” Rathi said .
The way interest rates have fallen and expected to decline further , affordability of buyers has gone up , he said.MO Alternates has Rs 10,000 crore of cumulative assets under management (AUM) in real estate across six real estate funds and co-investments.