Motilal Oswal launches $155m mezz fund

The third Indian mezzanine fund is targeting 25 percent returns on 10-12 transactions.

Motilal Oswal Real Estate (MORE) has launched its third mezzanine fund targeting INR1000 Crs ($155 million) and returns of up to 25 percent, reports PDI sister title Real Estate Capital .

The India Realty Excellence Fund (IREF) III will deploy development loans in India's major cities. It expects to make its first close in two to three months and provide its first two facilities before the end of the year.

Most of the capital in the five-year fund will be raised from high net worth individuals and family offices that have already invested in MORE's previous two funds.

MORE said the third fund will target 10-12 transactions in deal sizes ranging from $12 million -$18 million.

“The market has gone through a challenging time but one thing that remains strong is demand in affordable housing, so between $50 to $100 per sq ft houses,” said Sharad Mittal, director and head of real estate funds at MORE. “That's where the maximum demand is and that's where we are focusing this fund.”

MORE will look to provide funds to the larger developers in the Indian market. Its previous two funds have deployed to ATS, Shriram Properties, Godrej Properties and Rajesh Lifespaces across India's major cities.

“The idea is to work with the largest set of developers because that's where we believe the consolidation will happen. As the market remains flat for a long period of time, small to mid-size developers will find it difficult to operate,” said Mittal.

MORE's $118 million IREF II fund closed in March this year and is currently 80% deployed in three deals. It has returned 25% since launch in 2013. Its first fund, the $30m IREF, launched in 2009 and has exited four of its seven investments returning 82 percent of its capital.

MORE is part of the private equity business of Mumbai-based financial services group Motilal Oswal, which was founded by businessmen Raamdeo Agrawal and Motilal Oswal in 1987. MORE has about $155m in assets under management.