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September 20, 2007

Real Estate funds begin to tap retail investors

Businessworld has an article on how more and more real estate funds are tapping retail investors (with Rs. 25 Lakhs as the minimum investment amount).
Realty fund deals are being downsized. They kicked off with great fanfare in 2005 as platforms for big ticket investors, but are now going retail. The latest domestic scheme, aiming to raise Rs 700 crore, from the Ajay Piramal-promoted IndiaReits, allows for a minimum investment of Rs 25 lakh. Two earlier schemes — a domestic realty fund of Rs 430 crore that closed in September 2006, and an offshore fund of $200 million (Rs 820 crore) — had minimum investment norms of Rs 1 crore and $200,000 (Rs 82 lakh) respectively. The new IndiaReits fund has also created a Rs 30-crore pool to purchase units from investors in case they want to sell earlier.

Two other new realty funds have also gone ‘retail’. The Rs 150-crore ‘Milestone’ Fund promoted by Ved Prakash Arya, a former associate of Kishore Biyani of the Pantaloon Group, first went to the market seeking a minimum investment of Rs 1 crore. When that did not click, Milestone revised the minimum investment down to Rs 25 lakh. The change in track succeeded. Similarly, ICICI Prudential, which is a mutual fund raising $100 million (Rs 410 crore) just for realty projects, has a minimum investment of Rs 40 lakh. And they could be getting smaller. “The trend is towards tapping the new asset class with Rs 5 lakh or more, which was not able to invest earlier,” says Arvind Pahwa, CEO of the JP Morgan Realty Fund.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.