BANGALORE: Real estate-focused private equity firm Element Capital is in the process of launching a billion-dollar (about 5,400 crore) fund that will invest in low-income housing, as it looks to take advantage of a resurgent property market. 

The Element Value Housing Fund, which is expected to be launched by this August, has received commitments of about $300 million ( 1,600 crore) from many high net-worth individuals, endowments andpension funds, according to fund manager Sharik Currimbhoy. 

"We hope to have the first and final close of the fund by August 2012, and are in the process of identifying projects in Hyderabad, Bangalore, North Delhi, among others," Currimbhoy told ET. The news comes at a time when the country's moribund residential property market is expected to see an uptick in fortunes in 2013, driven by improved economic conditions. 

"The residential property market in India is doing quite well currently, and may even be doing better than commercial realty," said Ambar Maheshwari, managing director of corporate finance at Jones Lang LaSalle. 

The fund is expected to make investments of $100 million per project, and will look to stay invested for a minimum of five years, with the option of two one-year extensions. "The investments will be straight up equity investments, and we will be creating special purpose vehicles for each project identified by us," Currimbhoy said. Separately, recent policy changes have given fresh hope to fund managers, who have otherwise failed to deliver the promised double-digit returns to investors, even as the country's economic growth continued to contract. 

Last December, RBI allowed real estate players to avail external commercial borrowings for low-cost housing projects. Also, state-owned HUDCO has announced an interest rate cut of 0.5%, which will see floating interest rates for housing schemes for the poor range between 8.50% and 8.75%. "The availability of ECBs and HUDCO's rate cut have come as a huge positive, and we are looking to take advantage of that," Currimbhoy said.

 

source: http://economictimes.indiatimes.com/markets/real-estate/news/element-capital-to-raise-1-bn-fund-for-low-cost-housing/articleshow/18473133.cms