Aditya Birla launches real estate fund in India

22 April 2010

India-based Aditya Birla Financial Services, promoted by the Aditya Birla Group is launching real estate fund and expects to raise INR10 billion ($225 million) from investors in the next six months.

The proposed fund to be called Aditya Birla India Real Estate Fund-I, will have a greenshoe option of INR2.5 billion ($56 million), and will be advised by the group’s asset management arm, Birla Sun Life Asset Management. The fund will be invested in special purpose vehicles created by realty firms to implement projects. Despite a modest recovery in the market, realty firms have found raising money, an arduous task. Banks have tightened lending norms, while the IPO market is not fetching them the valuation they want. The last two IPOs, Godrej Properties and DB Realty, received a lukewarm reception from investors at the time of listing. Nitesh Estates, a Bangalore-based firm, was forced to cut its IPO price in order to attract investors a few days ago. The real estate fund will be invested into equity and, debt instruments of investee companies engaged in residential, commercial, retail malls, and other real-estate development projects in cities such as Mumbai, Pune, Chennai, Bangalore, Delhi, Kolkata and Hyderabad. Shashi Kumar, head, real estate investment advisory of Birla Sun Life Asset Management was reported stating that nearly 75% of the corpus of the fund will be invested in the residential space. He further stated that the fund will share its profits with the investors in a ratio of 80:20 with the majority being given to the investors and the rest to the investment manager.