IL&FS has first close of India realty fund at $578m

The Indian company says it hopes to reach a final closing on $750 million in the next three months.

IL&FS Investment Managers, the publicly listed private equity arm of finance company Infrastructure Leasing & Financial Services, has held a first close of its second real estate fund, India Realty Fund II, at $578 million (€403 million, Rs2,277 crore).

The firm said that it hopes to achieve the fund’s target of $750 million some time in the next three months. The fund will invest mainly in projects for housing, offices, hotels, IT parks, and unlisted real estate companies. The fund will have an eight to ten year lifespan and is aiming to achieve annualised returns of about 25 percent. The fund will target residential and commercial real estate, retail, redevelopment and hospitality sectors in the Tier-I and Tier-II cities, according to the firm.

The fund follows the firm's first real estate fund, which raised $525 million in April 2006 and is mandated to invest in equity-related instruments of Indian Companies operating in the real estate sector. With a corpus of over $525 million, that fund is now fully invested.

It is also separate from the $248 million India realty-dedicated fund IL&FS launched in partnership with Milestone Capital Partners in September. That fund is investing in leased or rented properties, and will have a lifespan of four years.

IL&FS Investment Managers manages over $1 billion on behalf of Indian and international institutions. The firm presently manages funds focused on investments across infrastructure, real estate, life sciences, manufacturing, information technology and consumer services.

The IL&FS fund will join a host of other Indian realty-focused funds launched in the past year. JPMorgan Chase, HDFC, ICICI Venture Funds Management and Sun-Apollo India Real Estate Fund are some of the firms that have raised funds to invest in Indian property.