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Suresh Krishnamurthy

Chennai , Oct. 23

DEWAN Housing Finance Ltd is ready to launch a real estate venture capital fund.

Asserting that it has the expertise to add value in this segment, Dewan Housing recently incorporated DHFL Venture Capital. This firm's first scheme - a real estate property fund - proposes to raise Rs 250 crore from investors with a greenshoe option of Rs 100 crore. This scheme is a seven-year close-end fund with an option to extend the maturity by another two years.

This scheme would seek to invest in both commercial and residential properties in a balanced manner. Focus would be on developing properties rather than invest in real estate, as according to Mr Arun V. Goel, Chief Executive Officer, DHFL Venture Capital India, development enhances returns considerably. Mr Goel added that since the market is overheated in certain pockets they would focus relatively more on secondary locations to add value.

Mr Goel expects annual returns of between 20 per cent and 25 per cent from this scheme. He expects both institutional and high networth investors to participate. The minimum investment for institutions and high networth investors is Rs 10 crore and Rs 2 crore respectively. ICICI Securities has been appointed as arrangers for institutional clients, Mr Goel added. He expects the scheme to achieve closure by the end of November. In the first tranche, the scheme would draw down close to 40 per cent of the total scheme size and start investing by the start of 2006.

Initial marketing expenses are not expected to exceed 2 per cent of the scheme size. Management fees would typically be about 2 per cent of the capital invested. There is also a profit sharing arrangement in place. Profit sharing will kick in if the rate of return generated by the fund manager exceeds 9 per cent. Mr Goel expects property disposals to start from the third year onwards.

Mr Goel would be the fund manager for this scheme.

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