Oh, Mumbai!

As LPs get comfortable with Asian property, a recent private equity real estate fund has raised more than $500m to invest in Indian real estate—and is widely thought to be one of the largest co-mingled vehicles focused on the subcontinent. By Aaron Lovell.

Mumbai-based Infrastructure Leasing & Finance Services Investment Managers has closed its first real estate and infrastructure-focused vehicle on more than $525 million (€408 million) in commitments from investors. While a number of vehicles have been raised and joint ventures have been established to invest in Indian property, the new fund is one of the largest raised so far and demonstrates the growing interest in the subcontinent.

The fund sponsors had an originally target of $300 million for the fund and announced it had $500 million in commitments last May. With leverage, the vehicle will have more than $1.5 billion in purchasing power.

The fund attracted a number of US investors, including public US pensions, endowments, foundations and corporate funds. According to local press reports, the California Public Employees’ Retirement System and the Oregon Public Retirement Fund have both committed $100 million to the IL&FS vehicle.

Jack Berquist, co-founder and managing director of the fund’s placement agent Presidio Partners, says he was surprised at the breadth of interest in investing in India.

“We thought the principal investors would be endowments and foundations,” he says. “We thought the market would be more narrowly focused.”

 As it turned out, LP appetite was robust. “We thought it would take a long time to educate investors about India,” Berquist says. “We were surprised by the number of investors already looking at India. We were also surprised at how quickly other investors go up-to-speed on India.”

The fund, which is targeting returns of 25 percent, will focus on the office, retail and residential sectors in the large Indian cities, as well as mixed-use township projects and special economic zones. In a statement, the firm said it would also focus on “other markets where there is substantial middle-income demand.”

Berquist says the firm was on the fundraising trail, it acquired four projects. It has also committed $25 million to the vehicle. 

The fund closing comes as interest grows in Asia. As a large English-speaking democracy with a growing gross domestic product, India has received its fair share of the attention. Investors are drawn to the country’s property markets as the government relaxes restrictions on foreign ownership of real estate.

International property investors are teaming up with local banks and developers for joint ventures, while smaller India-based funds have also raised money for real estate investments.

IL&FS is one of the largest infrastructure developers in India and also owns a real estate services company. The firm has also recently launched a joint venture with Mumbai- and Delhi-based Trikona Capital to invest in Indian infrastructure and real estate. Projects will reportedly include ports, airports, roads and special economic zones.

In addition to investors in the US and India, Berquist says he also sees investor interest in India growing in Europe.

“European institutions are starting to think about Asia,” he says.