Realty fund managers float schemes for construction finance

03 Mar 2021 Editorial Team

Property fund management arms of Indiabulls, Motilal Oswal, and others are launching schemes and funds to lend construction finance to real estate developers.

With banks becoming selective and non-banking financial companies (NBFCs) almost stopping new lending, there has been a major gap in construction finance over the past two years, fund managers told the media.

Indiabulls Asset Management Company Ltd is in talks with global investors to float a joint venture (JV) to lend construction finance to developers.

Indiabulls said it has been financing construction since the inception of the fund, and it slowed from 2017 to 2020, which was due to the challenges faced by the residential sector at that time.

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Recently, Motilal Oswal Real Estate launched its fifth fund called IREF V with a target of Rs 7,800 crore, which will focus on construction finance to developers. Motilal intends to invest this fund in post approval projects through senior secured lending across the country's top seven cities.

Motilal Oswal Real Estate said approximately Rs 260,000 crore of construction finance is required every year. After the Infrastructure Leasing and Financial Services (IL&FS) crisis, there has been a gap in capital availability.

Vishal Srivastava, president at Anarock Capital, said alternative investment funds (AIFS) were not in the Reserve Bank of India (RBI) jurisdiction and, therefore, asset quality deterioration would not affect the balance sheet.

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