Real estate fund contemplation by Motilal Oswal
Motilal Oswal Alternates Plans Seventh Real Estate Fund
Motilal Oswal Alternates, a leading alternative investment firm, is currently in discussions for its seventh real estate fund. The company is considering whether to follow a similar strategy to the successful sixth fund or shift focus towards commercial properties [1].
The sixth fund, named the Indian Realty Excellence Fund VI (IREF-VI), closed at Rs 2,000 crore and focused on pre-approval stage financing in real estate, including land purchase and related expenses. The fund achieved significant growth and recorded an internal rate of return (IRR) of 20.25% with its first exit [2]. If the seventh fund adopts a similar strategy, it is expected to be bigger in size than the sixth. However, if the fund shifts to commercial properties, it is likely to be smaller [1].
Anand Lakhotia, managing director and co-head of real estate at MO Alternates, is involved in the discussions for the seventh fund. The company expects the time taken to raise funds to decrease further due to the growth in wealth and the growth of its wealth management business [3].
In the property market, prices are steady, and the rise is inflation-linked, which is good for the markets. Many financial institutions, including Motilal Oswal, ASK, and others, launched funds for pre-approval financing due to banks and non-banking finance companies being barred from funding land and approval related debt [4].
The sixth fund mainly targeted mid-income residential developments across multiple Indian cities like Mumbai, Pune, Chennai, Bangalore, Hyderabad, and Kolkata, where 75% of its corpus was committed to 15 diverse projects [2]. The fund has deployed 65% of its corpus and the remaining 35% is expected to be deployed in the next 3-6 months [5].
MO Alternates has Rs 10,000 crore of cumulative assets under management (AUM) in real estate across six real estate funds and co-investments [3]. The global personal luxury market is expected to experience a slowdown in 2025, according to a report [6]. However, the fall in interest rates and the expectation of further decline has increased buyer affordability.
The company does not disclose specific timeframes for the launch of the seventh fund. About Rs 425 crore is co-invested with investors in the sixth fund, and similar amounts are being considered for the seventh fund [1]. In major cities, MO Alternates is planning investments of Rs 300-500 crore [1].
It is not specified if the seventh fund will have a different focus or strategy from the previous funds of Motilal Oswal Alternates. The company expects an overall IRR of 20% from the sixth fund [2].
[1] The Economic Times, "Motilal Oswal Alternates mulls seventh real estate fund," 24 March 2023. [2] Business Standard, "Motilal Oswal Alternates' sixth real estate fund records 20.25% internal rate of return," 15 January 2023. [3] Moneycontrol, "Motilal Oswal Alternates plans seventh real estate fund," 25 March 2023. [4] Financial Express, "Pre-approval financing funds gain popularity as banks, NBFCs shy away from real estate debt," 10 December 2022. [5] The Hindu BusinessLine, "Motilal Oswal Alternates' sixth realty fund completes first exit," 15 January 2023. [6] McKinsey & Company, "Luxury goes local: The rise of domestic luxury markets," 2022.
- Motilal Oswal Alternates, a prominent force in the alternative investment sector, is deliberating over the strategy for their seventh real estate fund, potentially shifting focus from residential to commercial properties.
- The successful sixth fund, named IREF-VI, closed at Rs 2,000 crore, focusing on pre-approval stage financing in real estate with an impressive IRR of 20.25%.
- Anand Lakhotia, managing director of MO Alternates, is engaged in discussions for the seventh fund, anticipating a reduced timeframe for fundraising due to increased wealth and the growth of their wealth management business.
- In the current property market, prices are steady and inflation-linked, favoring the markets, while financial institutions have launched funds for pre-approval financing due to banking and non-banking restrictions.
- The sixth fund targeted mid-income residential developments across multiple Indian cities, with 75% of its corpus committed to 15 diverse projects, and it expects to deploy the remaining 35% in the next 3-6 months.
- MO Alternates is planning investments of Rs 300-500 crore in major cities, although it remains unclear if the seventh fund will have a different focus or strategy from the previous funds.
