The private equity firm has already invested over Rs 1,200 crore in Mumbai, Bangalore, Chennai, Hyderabad and Ahmedabad through its investment platform after the outbreak of the Covid19 pandemic.
These investments were made against the backdrop of a serious shortage of liquidity in the real estate market following the IL&FS crisis. This was followed by the pandemic which made the problem worse and wreaked havoc in the normal course of business.
“We believe that the current market is in a bull cycle, however, available capital remains scarce to meet growing needs. With our funds, we meet capital needs throughout the project life cycle, including land and approvals financing, construction financing and last mile financing, ”said Sharad Mittal, CEO of Motilal Oswal Real Estate. “In addition to the amounts already committed, we plan to commit Rs 1,000 crore more during this fiscal year.”
MORE has invested funds in projects of Casagrand Group and Radiance Realty in Chennai, Ashwin Sheth Group and Marathon Group in Mumbai, Puravankara Group, Shriram Properties, Pacifica Group and Casagrand Group in Bangalore and Phoenix Group in Hyderabad.
The real estate projects are a mix of land, villa and apartment projects in the affordable and middle-income residential segment in these cities, in addition to a few commercial projects that MORE has invested in through this platform.
The private equity fund has also made 9 exits worth Rs 800 crore through this platform in the past 18 months.
“As we emerged from the first COVID-led lockdown in the second quarter of last year, we saw home sales surge due to a mix of factors such as increasing affordability, low mortgage rates decades and the increased emotional value placed on homeownership during the pandemic, ”Mittal said.
He believes fundamental factors combined with government initiatives will lead to even higher housing demand in the near future. The liquidity scenario will improve in the future and the real estate sector will receive the much-needed financing.
“With such a dynamic demand atmosphere, there has been an increase in the flow of transactions over the past 12 months. Although we have committed over Rs 1200 crore in the past 18 months, we have maintained a cautious approach and have remained true to our investment philosophy. Our successful exits over the past 18 months are the result of this proven investment philosophy and practical asset management, ”added Mittal.
MORE currently manages four real estate funds and manages assets worth approximately 5,000 crore. MORE’s fifth IREF V fund, which recently hit its third close at Rs 1,085 crore, has made five investments so far.
Its second fund, IREF II, which closed definitively in 2015, has to date made 14 investments and secured 11 exits at an internal investment rate of return (IRR) of 21.3%. The fund returned around 135% of the money to its investors.
The third fund of the private equity firm, IREF III, which closed definitively in 2017, has so far made 26 investments and obtained 10 exits at an IRR investment level of 22.5%. This fund returned almost 67% of the money to its investors.
MORE’s fourth fund, IREF IV, which reached its final closure in 2020, is currently being rolled out and has so far made 16 investments and secured 5 exits at an IRR investment level of 20.3%.