Bengaluru: Kotak Realty Fund has formed a partnership with Bengaluru-based DivyaSree Developers to start a $400 million fund that will develop and acquire commercial office assets across India. The India Office Assets Fund I is anchored by a unit of sovereign wealth fund Abu Dhabi Investment Authority (ADIA).
DivyaSree is the exclusive development partner and property adviser for the fund while Kotak Investment Advisors Ltd (KIAL) will act as an investment manager, the investment firm said. It is structured as an alternative investment fund (AIF) under Sebi regulations.
The fund’s strategy is to develop greenfield projects as well as acquire under-construction and completed commercial office assets across key markets such as Bengaluru, Hyderabad, Pune and Mumbai.
It is a rare occasion when the entire fund is backed by a large limited partner like ADIA.
The Kotak-DivyaSree fund follows the opening on Monday of the ₹4,750 crore initial public offering of Blackstone Group Lp-sponsored Embassy Office Parks real estate investment trust (REIT) in what is India’s first REIT.
“We have a compelling opportunity to develop and operate quality commercial assets for marque global customers. This is the first time in India where a financial institution and a developer have come together on a fund platform," said Vikas Chimakurthy, chief executive officer of Kotak Realty Fund.
India’s commercial office market is on the upswing and top developers funded by global investors such as GIC Pte Ltd are seeking to grow their portfolios expecting high demand and good momentum in leasing.
The growth in office space is despite a sustained slowdown in the residential sector where several firms are saddled with unsold apartments. This has led a number of developers to shift towards office projects, although the bulk of the office sector is still concentrated with a few top developers and investors.
Bhaskar N. Raju, managing director, DivyaSree Developers said, “...with this fund, we will consolidate our position in the three cities and also expand footprints in new key markets of Mumbai, Pune and NCR."
DivyaSree currently has commercial projects across South Indian cities of Bengaluru, Hyderabad and Chennai, where it is a major player.
“As we scale the asset management business, we will work with like-minded partners and create appropriate platforms to address a variety of capital requirements in India," KIAL CMD S. Sriniwasan said.
The growth in office space is despite a sustained slowdown in the residential sector where several realty companies are saddled with unsold apartments. This has led a number of developers to shift towards office projects, although the bulk of the office sector is still concentrated with a few top developers and investors.
Bengaluru led the overall office leasing in the country in 2018, according to India Office Market View report by CBRE South Asia Pvt. Ltd Tech companies dominated leasing activity, followed by engineering and manufacturing and telecom operators.
In March, ADIA also committed $500 million to a new distressed fund backed by Kotak Investment Advisors Ltd, the alternative investment arm of Kotak Mahindra Bank.
