ALTERNATE INVESTMENT FUNDS FOSTERING REAL ESTATE GROWTH
Aditi Watve, President, Anarock Group stated, “Recent SEBI data reveals that India's AUM (Assets Under Management) for AIFs stood at Rs 6.9 trillion in 2022; a significant figure reflecting the real estate sector's growth amidst the current funding challenges from banks and NBFCs. Industry stakeholders must engage with AIFs to navigate this landscape effectively.” Evaluating the attractiveness of Pune for investment, Nihar Thanawala, Managing Director, Motilal Oswal Real Estate, said, “Pune's property market is characterized by its steady growth and consis- tent consumer interest, contrasting with the unpredictable domains of NCR and Gurgaon. This market's resilience is further bolstered by a distinctive synergy among its devel- opers, setting it apart from areas like Mumbai and Navi Mumbai.” Anuranjan Mohnot, Co-Founder& MD, Lumos Alternate Investment Advisors, added, “Pune's transfor- mation, driven by infrastructural advancements such as the Mumbai Pune Expressway, Atal Setu, and it's expanding airport, is increasingly integrating it with Mumbai's urban sphere and fostering substantial real estate development opportunities.” Smita Patil, MD, SSPL Group, added, “Pune's property registra- tions surged by 46% in 2022, fuelled by infrastructural progress and IT sector growth, rendering it a prime locale for investors and AIFs to lever- age its developmental edge over larger cities.” Sharing her opinion on which of the three critical stages of a project—acquisition, obtaining ap- provals, or execution—demands the most funding from developers, Smita Patil articulated, “I prioritize early involvement in a project, particu- larly during the acquisition phase, to ensure thorough analysis and influence throughout the product's lifecycle. The AIF encourages developer collaboration, fostering trust and transparency that is essential for business success.” Talking about the relevance of traditional Alternative Investment Funds, Anuranjan Mohnot said, “The choice between debt and equity financing is critical to a business's success, a lesson highlighted by the recent debt cycle's adverse reper- cussions. Our company's 95% rate of successful investment exits re- flects our commitment to prudent fund management amidst evolving markets and the necessity of up- holding ethics to prevent conflicts of interest and market instability.” LIMITED LIABILITY PARTNERSHIPS Nihar Thanawala added, “Op- timal returns in real estate AIFs ne- cessitate a bespoke mix of debt and equity investments, finely attuned to varying market scenarios and the phases of project evolution, due to their susceptibility to singular underperforming assets.” Anuranjan Mohnot stated,“Since 2013, our investments have been proficiently managed through a Limited Liability Partnership without any issues”. Nihar Thanawala shared, “Despite minimal adoption of LLPs, a trend towards the uptake of private limited companies is evident, offering balance sheet advantages and net worth growth, albeit with higher initial funding demands.” Aditi Watve added, “An LLP's advantages include flexibility in management and ownership, tax benefits, and increased credibility. Developers should be aware of a solution that provides a tax and costs benefits.”. Smita Patil concurred, “Within the property market, firms often employ corporate or LLP entities to maximize efficiency in securing venture capital and optimize tax benefits. BRIDGING THE LIQUIDITY GAP Nihar Thanawala shared, “While our primary focus is on residen- tial properties, we remain open to promising commercial investment opportunities, especially in prime lo- cations where market performance has been strong. Considering the complexity of land titles and the availability of alternative opportunities, we prefer to exercise caution and refrain from engaging in such uncertain ventures.” Smita Patil shared her own experience, “I recently declined a land investment opportunity due to ongoing litigation involving a daughter's inheritance rights un- der new property laws. Engaging in litigation requires significant finan- cial backing, and while it may yield substantial returns akin to a lottery, a carefully managed portfolio is essential for both short-term and long-term investment strategies.” Aditi Watve cautioned, “T Venture capital investments outside of real estate can yield returns that greatly exceed the typical 25% internal rate of return he current real estate market trends raise concerns, such as exces- sive luxury and inflated unit values.” Anuranjan Mohnot added, “We are currently scheduling a micro-rate assessment for projects that are 80- 90% complete, including those with leasing completed or in indepen- dent buildings, and anticipate new regulations within the next quarter. Acknowledging the entirety of the life cycle, a 10-year horizon entails securing properties and resolving legal disputes for eventual takeover.” Developers seeking investment must adhere to a few key guidelinesand provide essential initial informa- tion to ensure seamless fundraising discussions. Anuranjan Mohnot said, “My recommendation for developers is to judiciously balance debt and equity to ensure sustainable returns and avoid the severe repercussions that have led to the downfall of many in the industry. With patient capital, a return of 18-20% is achiev- able and solid, though as fund man- agers, we must avoid guaranteeing excessively high returns to investors.” Nihar Thanawala added, “Developers must balance ambition with prudence to avoid the pitfalls of financial instability or missed opportunities, yet few attain this balance.” Smita Patil added, “Utilizing AIF significantly simplifies the developer's experience and enhances return on real estate investments. Employing AIF as a collaborative platform pro- motes shared learning and collective growth among developers.” Aditi Watve concluded, “The funding gap in development is in- deed genuine, and as banks and NBFCs adjust their strategies, AIF emerges as a prominent solution for this sector. Given the com- plexities of recovery and dispute resolution within the real estate sector, strengthening regulatory frameworks could vastly improve the potential for Alternative Invest- ment Funds (AIF) in India, attracting substantial capital.” Our current focus is on the western region of the city which is experiencing a surge in development and a significant gap between supply and demand. and as we initiate our sixth fund, we are open to exploring additional investment opportunities- Nihar Thanawala Upon reviewing the previous year's financial data, it is evident that western Pune led in launching and selling the highest number of units, with each well-priced, appropriately sized offering being fully subscribed- Aditi Watve We aim to collaborate with major developers on a litigation fund that acquires disputed properties at an early stage for a fraction of their value, resolving the disputes with our support and subsequently exiting at a profit- Anuranjan Mohnot In assessing the financial yields of real estate investments, commercial properties consistently deliver superior returns compared to residential options- Smita Patil
Tags : Aditi Watve Anarock Group Nihar Thanawala Motilal Oswal Real Estate Anuranjan Mohnot Lumos Alternate Investment Advisors Smita Patil SSPL Group