Arnya Real Estate Fund – Debt is our maiden fund registered with SEBI as Category II AIF. This fund will focus on investments towards growth capital for residential real estate development in top 8 cities of India. Fund will target investments in high yield fixed tenure debt deals in residential real estate projects.
Investment Opportunity
Attractive opportunity to invest in residential real estate through AIF structure
Demand side drivers
- Capital investment nature of business
- Expected growth capital requirement to increase from ~INR 75,768 Cr in 2023 to ~INR 2,04,000 Cr in 2030
Supply side constraints
- No customer advances post RERA
- Regulatory restrictions on Banks and NBFC for pre-approval funding
Opportunity for investors
- Real Estate – most favored asset class for investors
- Several advantages of AIF investments over direct physical investments
- Significantly higher return in residential RE debt AIF compared to other debt instruments
Capital is prerequisite for residential RE growth
Residential RE expected to grow more than 5x during 2020-30
Capital intensive business – residential RE requires substantial upfront investments towards land acquisition and project approvals
As per estimates, capital required towards early-stage growth capital for residential RE development in top 8 cities is expected to increase from ~INR 80,000 Cr in 2023 to ~INR 2 Lakh Cr in 2030
Massive gap between demand for growth capital and availability of financing from Banks / NBFCs – AIF to play major role in the growth of residential RE in India
Investment Strategy
Investment strategy to create diversified portfolio and generate superior return
Investment in Top 8 Cities namely Bangalore, Chennai, Hyderabad, Pune, Mumbai, NCR, Kolkata and Ahmedabad with focus on 4 IT Cities
Partnering with credible developers with proven financial and development track record
Investments in mid-income segment & affordable residential projects, opportunistically explore other asset classes
CESG goals target to ensure 20% energy saving in all projects funded by us
Well diversified portfolio across geographies, segments of residential RE & developers
High yield fixed tenure debt deals with proper security structure – funding in SPVs to mitigate IBC risks
Independent Credit, Risk and Asset Management (CRAM) Team – CRAM team to independently evaluate all deals before IC
Active Asset Management with 100% escrow of project cash flows, monthly review meetings and appointment of PMC and auditor in the project
Streamlined processes for investments with proactive asset management to generate superior risk adjusted return for investors
Investment Guidelines
Allocation strategy to optimize risk-return profile while ensuring superior risk adjusted returns
Active Asset Management
Proactive asset management to ensure timely stress identification and timely remedial actions
Project Monitoring
- Monthly review meeting of business plan versus actual performance
- Cost Monitoring
Analysis of cost through PMC - Regular site visits and compliance – mandatory compliance of safety standards
Project Control
- 100% escrow of project cash flows to ensure complete control
- Right to appoint PMC / Auditor for the investee projects / SPVs
- Sustainability Goal – Right to appoint CESG consultants
Exit Planning
- Half yearly / Annual valuation of security by third party valuers
- Regular discussion on corrective measures with Borrowers
- Exit strategy and timing based on market conditions
In-house asset management team supported by third party PMC, CESG consultants and auditors to ensure proactive asset management ensuring no slippages and superior risk adjusted returns
