IDFC Alternatives’ Big Fund for real estate

A big raise of Rs. 750 crore for real estate sector by IDFC Alternatives Ltd, a private equity fund managed by India’s IDFC is raising eyebrows!  As per IDFC, this is their maiden real estate funding focused on residential sector in India. This fund called IDFC Real Estate Yield Fund is an indication of a precautious return of risk capital to the country’s anxious real estate market.

We all know that real estate sector is going through a rough phase, reduced home sales and high interest rates are causing too much pressure on debt-laden developers who are trying to raise funds for recapitalizing existing bank loans and investing in future projects.

Around 60 to 80 crores will be invest by IDFC with gross target of 22 per cent returns. The four year (extendable by one year) close-ended private equity fund will invest in on-going residential projects in prime locations across six major cities in India including Delhi, Mumbai, Chennai, Bangalore, Hyderabad and Pune. Because of secured nature of underlying investments, this funding will pose a lower risk.

The IDFC Real Estate Yield Fund will capitalize on the opportunities by focusing on debt deals that generate high yields, while ensuring downside protection and adequate security cover.

IDFC claims that this fund has some unique differences – it is a more focused and investor-friendly debt fund that aims an even distribution of income to investors. The goal of the fund is to make a superior-quality portfolio by concentrating on reputable developers and brown field residential projects, which will help generate higher returns for the investors of the fund by engaging a balanced risk-return strategy.