MUMBAI: It's not the best of times for real estate funds. Given the slowdown, they are going slow on raising money from investors - a process referred to as the drawdown option, on account of paucity of investment opportunities.
Typically, a real estate fund works on a commitment from its investors for the amount to be raised. Initially, the fund collects about 20-25% of the committed amount. As and when investment opportunities crop up, funds make a drawdown on investors. Under normal practice, investors get about a month to pay such drawdowns.
Funds are now realising that it has become difficult to deploy money in the current market. This has resulted in a slow down in calling for drawdowns. Over the past 2-3 years, several companies, including India REIT, Milestone Capital Advisors, HDFC and Kotak, raised money from local as well as overseas investors. The ticket size for the domestic funds was between Rs 25 lakh and Rs 5 crore.
Anand Jain-promoted Urban Infrastructure Fund, which had a minimum ticket size of Rs 1 crore, closed its first fund in a year-and-a half. After the rights issue in May last year, the fund has not exercised the drawdown option. In case of Kotak India Real Estate Fund, launched in July 2007 with a ticket size of Rs 5 crore, only 47% of the committed amount has been drawn down.
“We have not asked for any money in the past nine months, since we do not find any suitable investment opportunities,” said a fund official requesting anonymity. India REIT’s case is similar. It has two domestic funds with a corpus of Rs 430 crore and Rs 550 crore, respectively. “Though we completed the drawdowns six months ago, only 75% of the funds have been deployed,” Ramesh Jogani, MD, India REIT Advisors, said.
Bucking the trend is Milestone Capital Advisors, which thinks it is the right time to invest in real estate. It chose to make a drawdown option on investors in its fund, Milestone Domestic Scheme II, a month ago. “There have been some requests from investors asking for extensions, but such cases are few and less than 10%,” Ved Prakash Arya, CEO, Milestone Capital Advisors, said.
Typically, a real estate fund works on a commitment from its investors for the amount to be raised. Initially, the fund collects about 20-25% of the committed amount. As and when investment opportunities crop up, funds make a drawdown on investors. Under normal practice, investors get about a month to pay such drawdowns.
Funds are now realising that it has become difficult to deploy money in the current market. This has resulted in a slow down in calling for drawdowns. Over the past 2-3 years, several companies, including India REIT, Milestone Capital Advisors, HDFC and Kotak, raised money from local as well as overseas investors. The ticket size for the domestic funds was between Rs 25 lakh and Rs 5 crore.
Anand Jain-promoted Urban Infrastructure Fund, which had a minimum ticket size of Rs 1 crore, closed its first fund in a year-and-a half. After the rights issue in May last year, the fund has not exercised the drawdown option. In case of Kotak India Real Estate Fund, launched in July 2007 with a ticket size of Rs 5 crore, only 47% of the committed amount has been drawn down.
“We have not asked for any money in the past nine months, since we do not find any suitable investment opportunities,” said a fund official requesting anonymity. India REIT’s case is similar. It has two domestic funds with a corpus of Rs 430 crore and Rs 550 crore, respectively. “Though we completed the drawdowns six months ago, only 75% of the funds have been deployed,” Ramesh Jogani, MD, India REIT Advisors, said.
Bucking the trend is Milestone Capital Advisors, which thinks it is the right time to invest in real estate. It chose to make a drawdown option on investors in its fund, Milestone Domestic Scheme II, a month ago. “There have been some requests from investors asking for extensions, but such cases are few and less than 10%,” Ved Prakash Arya, CEO, Milestone Capital Advisors, said.
Soruce:http://economictimes.indiatimes.com
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