Real estate-focused private equity firm Element Capital is
in the process of launching a billion-dollar (about 5,400 crore) fund that will
invest in low-income housing, as it looks to take advantage of a resurgent
The Element Value Housing Fund, which is expected to be
launched by this August, has received commitments of about $300 million ( 1,600
crore) from many high net-worth individuals, endowments and pension funds,
according to fund manager Sharik Currimbhoy.
"We hope to have the first and final close of the fund
by August 2012, and are in the process of identifying projects in Hyderabad,
Bangalore, North Delhi, among others," Currimbhoy told ET. The news comes
at a time when the country's moribund residential property market is expected
to see an uptick in fortunes in 2013, driven by improved economic conditions.
"The residential property market in India is doing
quite well currently, and may even be doing better than commercial
realty," said Ambar Maheshwari, managing director of corporate finance at
Jones Lang LaSalle.
The fund is expected to make investments of $100 million per
project, and will look to stay invested for a minimum of five years, with the
option of two one-year extensions. "The investments will be straight up
equity investments, and we will be creating special purpose vehicles for each
project identified by us," Currimbhoy said. Separately, recent policy
changes have given fresh hope to fund managers, who have otherwise failed to
deliver the promised double-digit returns to investors, even as the country's
economic growth continued to contract.
Last December, RBI allowed real estate players to avail
external commercial borrowings for low-cost housing projects. Also, state-owned
HUDCO has announced an interest rate cut of 0.5%, which will see floating
interest rates for housing schemes for the poor range between 8.50% and 8.75%.
"The availability of ECBs and HUDCO's rate cut have come as a huge
positive, and we are looking to take advantage of that," Currimbhoy said.