Fire Capital plans VC fund for real estate

Fire Capital Fund, among the first venture capital funds for real estate in India, plans to invest Rs 500 crore over three years.

The company recently got clearance from SEBI for its Rs 200 crore India Fund and is in the process of raising a further Rs 300 crore of foreign funds based out of Mauritius. It is expected to incorporate the foreign fund by February and file for approval by March 2005.

Said Om Chaudhry, MD, Fire Capital: "We have almost tied up the entire India fund from institutional investors and we are getting a lot of enquiries for the foreign fund which we expect to tie up by mid 2005. While the India Fund will focus on the retail segment like housing project and malls, the foreign fund will focus exclusively on integrated townships and software parks."

The fund will look at investing a minimum of Rs 10-25 crore per project and based on the scope of the project, increase exposure. It has identified three deals to invest in: a mixed use development in the National Capital Region (project of Rs 290 crore), a township in Bangalore (Rs 370 crore) and a housing and commercial project in Pune (Rs 180 crore).

Added Chaudhry: "Worldwide, real estate represents a high share of overall investments. Real estate returns are superior to stocks and bonds on a risk-adjusted basis and performance has virtually no correlation with stocks and bonds, thereby offering substantial diversification benefits. Over the last few years, India has become one of the more attractive economies for investors around the world. We are looking at returns of 30 per cent from these projects over a a seven-year period."

On investments flowing into real estate in India, a VC analyst said: "According to estimates, we are looking at $800 million of fund flow in this sector in the near future and Fire Capital is making a strategic move in this space to leverage the growth in real estate."