Indian stock market regulator SEBI's ( Securities and Exchange Board of India's) norms for AIF (alternative investment funds ) are likely to make life difficult for real estate fund managers, forcing them to adopt new ways to attract investors.
Recently, SEBI notified AIF regulations for private equity, hedge funds, venture capital funds (VCF) and real estate funds, among others.
The norms say the funds should not have more than 1,000 investors and the minimum investment amount should not be less than Rs. 1 crore. Previously, SEBI had mandated a minimum investment of Rs. 5 lakh for investors under the VCF guidelines.
Mr. Ramesh Jogani, MD, Ajay Piramal group-promoted Indiareit Fund Advisors said', "Fund sizes will shrink due to the new norms and they will have to tweak their strategies. Real estate funds will be hit hard, given that many fund managers were raising smaller amounts like Rs. 1 lakh to Rs. 10 lakh from investors. I think fund raising will become difficult & fund sizes will now shrink. There may not be many people with a kitty of Rs. 1 crore to invest in funds
Highlights:
Minimum : Rs 20 crore
Number of Investors: Maximum 1,000
Investment Threshold: Minimum Rs. 1 crore
Tenure: Minimum 3 years
Fund Type: Close ended
Sponsors Obligation : Minimum 2.5 % of corpus or Rs. 5 crore
Investment in Single Company : Not above 25 %
Mr. Jogani said. ''We could have raised Rs. 500 crore to Rs. 900 crore as our minimum investment threshold was Rs. 25 lakh. With a Rs. 1 crore threshold, we can look at Rs. 250 crore to Rs 300 crore"
Though Indiareit is planning to raise 2 funds — one a Rs. 500 crore slum redevelopment fund and the other, a Rs 840 crore to Rs. 1,120 crore)rental yield fund,
Mr. Jogani said, "The new guidelines do not apply to these funds as they have already applied under the earlier VCF guidelines. By the new norms, funds already registered under VCF norms, would continue to be governed by them, including raising commitment up to its targeted corpus."
Mr. V. Hari Krishna, Director, Kotak Realty Fund said, 'Quality of investors and product mix will change with the new guidelines. An investor who is putting in Rs. 1 crore is different from one investing Rs. 5 lakh in a fund."
Mr. Bikram Sen, Chief executive, ArthVeda Fund Management, the fund management arm of Dewan Housing Finance said, .“Following the change in threshold, the private equity industry will witness more well-researched products and weed out non-serious players".
According to data from VCCedge, Indian fund managers have raised nearly 12 funds with a total size of Rs. 5,600 crore so far in 2012, compared to 25 funds totalling around Rs 18,000 crore in 2011. The year 2007 saw most number of funds (29) raised Rs 37,500 crore,
Mr. K Madhusudan, co-CIO of Bangalore-based Azure Capital, said,'' Fund managers will have to tweak the strategy of raising funds from retail investors to high net worth individuals (HNIs) or ultra HNIs to comply with the norms. Azure plans to raise a Rs 200 crore to 300 crore rental yield fund and a development fund of Rs. 400 crore and is awaiting SEBI notification of AIF norms. We need to change our strategy & give private deals to HNIs and ultra HNIs who do not prefer the fund route as they are expensive and transparency levels are low. We have to pick and choose some projects and allow investors to directly invest in them"
Src: BS
Recently, SEBI notified AIF regulations for private equity, hedge funds, venture capital funds (VCF) and real estate funds, among others.
The norms say the funds should not have more than 1,000 investors and the minimum investment amount should not be less than Rs. 1 crore. Previously, SEBI had mandated a minimum investment of Rs. 5 lakh for investors under the VCF guidelines.
Mr. Ramesh Jogani, MD, Ajay Piramal group-promoted Indiareit Fund Advisors said', "Fund sizes will shrink due to the new norms and they will have to tweak their strategies. Real estate funds will be hit hard, given that many fund managers were raising smaller amounts like Rs. 1 lakh to Rs. 10 lakh from investors. I think fund raising will become difficult & fund sizes will now shrink. There may not be many people with a kitty of Rs. 1 crore to invest in funds
Highlights:
Minimum : Rs 20 crore
Number of Investors: Maximum 1,000
Investment Threshold: Minimum Rs. 1 crore
Tenure: Minimum 3 years
Fund Type: Close ended
Sponsors Obligation : Minimum 2.5 % of corpus or Rs. 5 crore
Investment in Single Company : Not above 25 %
Mr. Jogani said. ''We could have raised Rs. 500 crore to Rs. 900 crore as our minimum investment threshold was Rs. 25 lakh. With a Rs. 1 crore threshold, we can look at Rs. 250 crore to Rs 300 crore"
Though Indiareit is planning to raise 2 funds — one a Rs. 500 crore slum redevelopment fund and the other, a Rs 840 crore to Rs. 1,120 crore)rental yield fund,
Mr. Jogani said, "The new guidelines do not apply to these funds as they have already applied under the earlier VCF guidelines. By the new norms, funds already registered under VCF norms, would continue to be governed by them, including raising commitment up to its targeted corpus."
Mr. V. Hari Krishna, Director, Kotak Realty Fund said, 'Quality of investors and product mix will change with the new guidelines. An investor who is putting in Rs. 1 crore is different from one investing Rs. 5 lakh in a fund."
Mr. Bikram Sen, Chief executive, ArthVeda Fund Management, the fund management arm of Dewan Housing Finance said, .“Following the change in threshold, the private equity industry will witness more well-researched products and weed out non-serious players".
According to data from VCCedge, Indian fund managers have raised nearly 12 funds with a total size of Rs. 5,600 crore so far in 2012, compared to 25 funds totalling around Rs 18,000 crore in 2011. The year 2007 saw most number of funds (29) raised Rs 37,500 crore,
Mr. K Madhusudan, co-CIO of Bangalore-based Azure Capital, said,'' Fund managers will have to tweak the strategy of raising funds from retail investors to high net worth individuals (HNIs) or ultra HNIs to comply with the norms. Azure plans to raise a Rs 200 crore to 300 crore rental yield fund and a development fund of Rs. 400 crore and is awaiting SEBI notification of AIF norms. We need to change our strategy & give private deals to HNIs and ultra HNIs who do not prefer the fund route as they are expensive and transparency levels are low. We have to pick and choose some projects and allow investors to directly invest in them"
Src: BS
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