LIC Housing Finance Ltd, which is the mortgage arm of India’s largest insurance provider, has successfully achieved a first closing of Rs 250 crore for its inaugural real estate private equity fund. Launched late last year, this fund has a target size set at Rs 500 crore, alongside a green shoe option of Rs 250 crore. This green shoe provision enables LIC Housing Finance Asset Management Company, the fund’s management entity, to offer more units than initially anticipated.
AK Sharma, chief executive of LIC Housing Finance, conveyed to ET, "We have raised Rs 250 crore so far from institutional investors like banks and corporates.” He further mentioned, “We also have additional commitments of Rs 50 crore and remain optimistic about concluding our fundraising efforts by the end of June." The fund is aiming for a robust target net internal rate of return exceeding 22%. Its investment strategy is to focus on urban real estate ventures such as mid-income housing projects, IT parks, and warehouses located in tier I and II cities. “There is a substantial demand for homes in the mid-income bracket, priced between Rs 1,600-4,000 per sq ft, and we intend to pursue these opportunities,” Sharma remarked.
The fund is actively exploring multiple proposals already. The asset management arm of LIC has secured commitments of Rs 50 crore each from LIC itself and LIC Housing Finance. In its shift in strategy, LIC, which previously targeted retail investors, is now primarily focused on raising the remaining capital from institutional backers. According to Sharma, “Retail investment in private equity is yet to gain traction. Retail investors typically do not grasp the associated risks and rewards inherent in this segment.” Currently, there are at least six real estate-centric funds making efforts to amass fresh or follow-up funds to invest in the burgeoning Indian real estate sector. Notable among these are HDFC Property Fund, JP Morgan Asset Management, IndiaReit Fund Advisors, and Kotak Realty Fund.