Kotak plans to float real estate fund

The Kotak group is looking at the possibility of floating a real estate fund in 2005 and has also firmed up plans of providing advisory services for 'art' as an investment option.

"Although guidelines for a real-estate fund is yet to be finalised by the government, we would get into the fray as soon as the Centre allows us to," said Uday S Kotak, executive vice-chairman and managing director Kotak Mahindra Bank, at a select press meet here today.

"We feel that the real estate sector will witness huge growth in the next few years. The state governments are also trying to facilitate growth through reduction in stamp duties and other charges. Various state governments are also trying to reduce legal formalities required for the sector," he explained.

Kotak also said that commodity fund was another area which the group was keen in making a foray into. "We feel that regulations for commodity funds would be preceded by real estate funds and would also plan accordingly," he added.

Explaining the broad outlines of a real-estate fund, he said, "This fund which pools resources from individual investors invests in the real state sector. These funds have some sort of lock-in period because investment in real estate is not very liquid. Lock-in periods are typically two to three years after which these funds allows an exit option."

About investment in 'arts', Kotak said, "Initially we would allow our clients access to experts in the fields who would provide investment advise. The service would be launched around three months from now and we are working on the details."

"In the short run the art-investment service would only be a value added-service where third party experts would provide investment advise," he said.

On the private equity fund that the group launched, Kotak said the fund expected to mop up around Rs 400 crore. "We have already received firm commitment for Rs 205 crore and there are a host of proposals which we are examining," he added.

Kotak also said that there was no possibility of dilution of stake in the bank by the promoters in the next nine to 12 months, following which the situation would be reviewed based on capital requirement.

He said the bank would have 100 branches in the next couple of years, thus giving it a pan-India presence.