Sensing opportunities in stalled real estate projects and cash-starved developers, homegrown fund managers are launching stressed asset funds.
After the SWAMIH (Special Window for completion of Construction of Affordable and Mid Income Housing) Investment Fund of SBI Cap ventures, Ahmedabad-based Lumos Alternate Investment Advisors and Mumbai-based Nisus Finance have come up with funds for stressed real estate assets.
With very low sales and financing from banks and NBFCs drying up, fund managers expect good returns from their investments, experts said.
Lumos Alternate Investment Advisors has tied up with some prominent real estate developers in the country to launch its maiden Rs 300 crore stressed assets-focused real estate fund. The proposed fund will focus on last-mile funding and acquisition of stressed residential and commercial projects in six major cities with an investment ticket size of Rs 20-40 crore per transaction.
Lumos was set up by Anuranjan Mohnot, who was earlier CEO of Amplus Capital Advisors, part of Arvind group.
"Stressed assets acquisition being more of operational play real estate developers, as operating partners in the acquisition of stressed assets and last-mile funding, will provide a unique win-win investment opportunity to investors where operational risk is mitigated through active participation," Mohnot said.
Mohnot said this would better visibility of financial closure, execution and exits. The operating partners will invest in the fund and the projects to have proper skin in the project.
Mumbai-based Nisus Finance has also got commitments from Investors for a Rs 500 crore fund to invest in distressed assets stuck with NBFCs or projects that need last mile funding, said Amit Goenka, managing director and chief executive at Nisus Finance.
"We are looking at projects which are stuck due to lack of funding or where management is weak," Goenka said.
Goenka said they are also curating a portfolio of stressed commercial assets Rs 200 crore to Rs 300 crore.
"Many such assets have come to us in April and May. Rents are under pressure and many LRDs (lease rental discounting ) are looking for refinancing," he said.
In a recent note, Vishal Srivastava, president–corporate finance, Anarock Capital, said stalled projects need a new source of last-mile funding to complete the projects." If they get it, the developer will be ready to pay a premium to be able to complete the project with incremental capital, and the NBFC can recover its dues and ease its own balance sheet. Buyers will get their flats and more buyers will line up to buy completed units," Srivatsava said.
According to Srivastava, along with the INR 25,000 Crore SWAMIH fund.there are various other foreign funds with money having visibility of more than Rs 35,000 crore
A large piece of this pie - approximately 60 per cent - is from US-based funds, followed by 31 per cent from Asia (excluding India), 6 per cent from India and 3 per cent from Europe-based funds.
This capital is being raised for projects primarily in Noida, Greater Noida and Gurgaon in NCR, Mumbai and Thane in MMR, and Bangalore, Hyderabad and Pune. The projects in question have anything between 100-800 units each, with unit ticket sizes ranging from Rs 28 lakh in Noida to Rs 15 crore in Mumbai, he said.
Existing funds of Motilal Oswal are also looking to invest in stalled projects.
"We are looking at last mile deals, projects which can lead to completion with our capital and secondly buyout of loans of viable projects at attractive valuation," said Sharad Mittal, chief executive officer, Motilal Oswal Real Estate.