IDFC Alternatives, a wholly owned subsidiary of infrastructure finance company IDFC, has raised ₹750 crore from domestic investors for its maiden real estate fund. The performance, despite the slowdown in the economy, exceeded the company’s expectations.

The firm was expecting to raise about ₹620 crore ($100 million) through the domestic fund — IDFC Real Estate Yield Fund — which focuses on the residential real estate segment in India.

“There is high demand for capital from real estate developers as they are unable to raise funds either from banks or through equity. Most of the banks have reached their lending limits to the real estate sector,” MK Sinha, Managing Partner and Chief Executive Officer of IDFC Alternatives, said.

The fund will target residential projects which are under construction across the top six cities — Delhi, Mumbai, Chennai, Bangalore, Hyderabad and Pune. The focused debt fund, with a medium-term horizon, has already committed ₹123 crore across two residential projects in Pune and Bangalore.

Right time

“This is the right time to plough money into the sector and structure transactions that will provide high yields going forward,” Sinha said.

The fund will capitalise on the opportunities by focusing on debt deals that generate high yields, while ensuring downside protection and adequate security cover.

IDFC Alternatives, a multi-asset class fund which manages a total corpus of ₹14,414 crore, is also raising about $300 million through a foreign rental yield fund. The firm expects to mop up the funds by July.

“That’s still under negotiations. The international market perceptive of India is still weak, we are waiting for the general elections and expect perceptions to improve after that,” Sinha added. IDFC Alternatives, which had received commitments worth $644 million for its second infrastructure fund, expects to announce the final close in the next three to four months. “It’s on track,” he said.

The PE firm is targeting a corpus of $1 billion. It would invest in roads, ports, airports and power, among others.

(This article was published on March 20, 2014)
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