Reliance Capital is gearing up to unveil its inaugural fund dedicated to real estate, amounting to ₹1,000 crore, by the close of 2012. This initiative is spearheaded by the Anil Dhirubhai Ambani (ADA) Group, and the management will be overseen by Reliance Portfolio Management Services (PMS). The fund's primary focus will be on developing residential real estate properties, particularly in cities like Pune, Chennai, Bangalore, Mumbai, and Delhi. The selection of these metropolitan locations stems from their robust real estate markets, which are showing significant value appreciation.
This fund intends to serve as a financial bridge for projects that have come to a halt due to capital shortages. The ADA Group will act as the principal investor and aims to achieve an internal return of between 18% to 22%. On average, the fund plans to allocate around ₹100 crore in investments per project.
In a novel hybrid structure, this fund is designed to deliver both debt and equity financing to the stalled ventures it targets. Earlier reports in August by the Economic Times indicated an ambition to raise ₹1,500 crore through Reliance PMS, also aimed for investment within the real estate sector nationally.
However, navigating recent investor indifference has led to a reduction in targeted fundraising amounts, stemming from perceived shortfalls in real estate opportunities. Research entity Venture Intelligence highlighted a noteworthy decline in the real estate market's vitality, documenting substantial drops in property deal values. Specifically, 29 real estate transactions totaling $1.04 billion (approximately ₹5,500 crore) occurred in 2012, demonstrating a stark fall from 87 deals valued at $3.9 billion the previous year—reflecting a staggering 72% decrease in cumulative deal value from 2011.
Furthermore, it was reported by Hindustan Times that inquiries sent to the Reliance ADA Group and to Shahzad Madon, the head of PMS and Alternate Assets at Reliance Portfolio Management Services, received no responses.