India's Kotak Realty fund raises $98 mln

MUMBAI Tue Dec 13, 2011 5:36am EST

MUMBAI Dec 13 (Reuters) - Kotak Realty Fund, a unit of Kotak Mahindra Bank, said on Tuesday it raised 5.23 billion rupees ($98.2 million) from domestic investors for a fund that will mainly invest in high-yield debt instruments of real estate developers.

The primary focus of the fund will be on residential projects, it said in a statement.

"The financing constraints facing the real estate sector will help provide the funds with attractive investment opportunities and we expect deal flow activity to remain robust," said Vikas Chimakurthy, director at Kotak Realty Fund.

Kotak Realty Fund currently manages about $700 million across five funds.

Indian developers have come under pressure in recent months as rising interest rates deter buyers, even as it becomes more expensive for builders to access funds.

Private equity investment in Indian realty was marginally down in the first nine months of 2011 to about $784 million, from $817 million at the same time last year, according to data from industry tracker VCCircle.com.

Domestic property-fund houses including Kotak Realty, and IndiaReit Fund Advisors, a fund backed by UK private-equity firm 3i Group, are in the process of raising about $1 billion in total, in a bet on the long-term case for property in Asia's third-largest economy. ($1=53.3 Indian rupees) (Reporting by Indulal PM; Editing by Aradhana Aravindan)

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