Wealth Company has launched an interesting new cat II AIF called Bharat Bhoomi Fund (official name Bharat Value Fund Series V).
Unlike most real estate funds that basically lend to RE developers, this one offers HNIs an opportunity to participate in something which has always had strong intuitive appeal across the country for generations – land.
The fund will partner with established local land developers in and near key metros in specific areas that are seeing significant infrastructure upgrades (like the Navi Mumbai airport area in Mumbai 3.0 for example) to develop and sell plotted residential land.
While plotted residential land sees a lot of investor attention, this fund offers investors a chance to go one step above in the value chain – into the development and sale of plotted land.
Sitla says this is an equity oriented exit focused structure which aims to deliver to investors a net return (after costs and tax) of 20% IRR over a 4-5 year horizon of the product.
The fund will invest in 10-12 projects, each having a 3 year period from start to exit, with the first set of cash inflows designed to start coming in by the 12th month. As the fund invests across its 10-12 projects over the next few months, investors can expect a steady stream of income, return of capital and profit share over the life of the fund, thus helping drive a robust IRR.
He acknowledges that a key risk in such a structure is getting caught in a real estate cycle downturn during the life of the fund. The team has put in a number of risk mitigants to manage such situations – the principal one being the low entry cost at which they hope to get in, which then allows some options to play out for exits to take place.