Indiareit Fund, a boutique real estate venture capital fund promoted by Piramal Enterprises, has

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now launched a follow-on close-ended domestic venture capital fund scheme IV, focused on investing in the Indian real estate market. The Rs 500 crore fund intends to participate by means of equity instruments in unlisted companies (special purpose vehicles for specific projects identified by the fund for investment) engaged in real estate development.

The latest fund will primarily focus on residential segment especially in cities like Chennai, Bangalore, Mumbai and Delhi.

“Established markets with proper civic infrastructure and employment opportunities provide firm demand. Moreover, residential project is a self-liquidating asset with minimal exit risk due to strong pre-sales, resulting in negative working capital for construction that made us mobilise the fund,” says Ramesh Jogani, CEO and managing director, Indiareit.

According to him, the fund has been very active in the southern market. “In Chennai, we are focusing on the resilient residential sector. We plan to target mid-segment housing with a price range of Rs 2,500 – 3,000 per sq ft at launch, catering to large untapped demand and keeping entry points low,” he said.

He said the fund manages a total corpus of $450 million, raised through multiple funds over a period of time. This includes an offshore fund, where 3i, one of the world’s leading private equity and venture capital firms, is a cornerstone investor.

“Out of the Rs 1,850 crore ($450 million) that we had raised in the past, we have so far deployed Rs 1,550 crore. Of this, around Rs 700 crore was deployed through the offshore fund in two projects each in Mumbai and Hyderabad and one in Pune. Another Rs 800 crore was deployed through domestic funds,” Jogani said.

Indiareit’s director – investments, Jasmeet Chhabra said the fund has been investing in residential and commercial space segments. “About 70 per cent of the funds are deployed in residential, while the balance 30 per cent goes into commercial space. Even here, we restrict ourselves to IT and office space and keep away from retail space in the malls,” Chhabra pointed out.

Despite the judicious approach to investment, the fund seems to have got caught in an IT space investment in Chennai’s OMR quagmire, where huge IT parks dot the skyline but very few occupied. “Yeah, we had invested in SSPDL’s Alpha City for developing a five lakh sq ft IT Park. While the facility is ready, we only have IBM, which is just about moving in and it will eventually occupy up to 60,000 sq ft of space,” says Chhabra.