Motilal Oswal Alternates, the alternative investment arm of Motilal Oswal Group, said it is set to raise up to Rs 2,000 crore ($240.6 million) through its sixth real estate fund, strengthening its presence in India’s growing real estate market.
The fund, called the India Realty Excellence Fund VI, will make early-stage investments in mid-income/affordable residential projects across the Indian cities of Mumbai, Delhi-NCR, Pune, Bangalore, Chennai, Hyderabad, Kolkata, and Ahmedabad.
Motilal Oswal expects to achieve the first close of the fund by December 2023 and complete the fund-raising process within the following 6-9 months.
Motilal Oswal Alternates currently manages five real estate funds — the India Realty Excellence Fund (IREF) and its four successor funds.
Its last fund, IREF V, is a Rs 1,215-crore domestic real estate fund, which has made 15 investments till date and secured three exits at an investment level IRR of 18.1%.
Motilal Oswal Alternates has to date undertaken more than 140 transactions and funded Rs 7,500 crore across 50 developers in India. They have also exited more than 70 transactions and generated an IRR of more than 20% in these exits.
Early-stage investments in real estate offer a significant opportunity, given the crucial capital developers need at the beginning of a project, said Anand Lakhotia, Co-Head of real estate funds at Motilal Oswal Alternates.
“With various restrictions on banks and NBFCs to fund this critical phase, coupled with the promising outlook of the real estate market, our fund is strategically positioned to seize this opportunity,” Lakhotia added.
The fund announcement comes amid a widespread industry slump resulting from the ongoing high-interest rate environment and global uncertainties. According to real estate consultant ANAROCK, India’s real estate sector recorded private equity investments worth $1.9 billion in Q1 2023, a tad lower than $2 billion in the year-ago quarter.
Knight Frank, meanwhile, reported that private equity investments in the sector tumbled 20% in the first half of 2023 to $2.58 billion from the same period last year. Funding in real estate by private equity firms is expected to reach $5.6 billion at the end of 2023, a 5.3% growth from last year, Knight Frank, which expects the market to bounce back, said in the report.