India’s largest alternative investment management firm Kotak Investment Advisors’ real estate private equity fund Kotak Realty Fund has formed an alliance with The Guardians Real Estate Advisory to set up a development management platform, persons with direct knowledge of the development, told ET.
Kotak Realty Fund has earmarked Rs 2,000 crore for lending to real estate projects to be managed by the joint venture company. The platform to be known as Ground Holding Realty will help mid-sized developers and landowners develop and monetise their assets.
Both–Kotak Realty Fund and The Guardians Real Estate–have already registered the joint entity and also set up the 35-member team for the same. Vrushank Mehta from Warburg- Runwal retail development platform will be joining as the chief executive officer (CEO) of the joint venture.
While Kotak will be the financing partner, Ground Holding Realty will be responsible for the development, sales & marketing efforts.
Kotak Realty Fund is a leading private equity real estate fund in the country with over $2.2 billion of aggregate capital commitments. Guardians is a leading player in sales & marketing aggregation with sales of over Rs 6,500 crore in the last 12 months.
Apart from working on projects to be financed by Kotak Realty Fund, the joint venture will also engage with other institutional investors and lenders to help take distressed real estate projects to conclusion. This will help reach an active resolution of stressed assets through financing, execution, sales & marketing support.
“At present there are firms that would offer diagnostic support or financing for stressed projects and that too as independent services. However, this joint entity of Kotak and Guardians will be providing a comprehensive resolution to such projects,” said one of the persons mentioned above.
In addition to providing the much-needed last mile financing to stressed projects, the Kotak-Guardian joint venture will also develop and execute these projects.
While there are real estate developers who undertake development management work, this will be India’s first such institutionally-backed and professionally-managed platform.
ET’s separate email queries to Kotak Investment Advisors and The Guardians Real Estate remained unanswered until the time of going to press.
With this joint venture, as an institutional financier, Kotak Realty Fund will get access to good projects with high probability of completion with such support, while the Guardians Real Estate will be able to push its sales and marketing aggregation efforts.
According to government estimates, there are 4.58 lakh stalled housing units in 1,509 residential projects stuck across the country.
The outbreak of Covid19 pandemic has accelerated the ongoing consolidation in the real estate sector. Large established and listed realty developers are gaining more market share in terms of sales and liquidity as homebuyers are relying more on developers’ execution track record and sound financial position to take the project to conclusion.
Small and mid-sized developers, at the same time, are finding it relatively tough to attract demand as well as funding, which effectively results in the project turning unviable. The Kotak-Guardian joint venture is looking to support such developers and projects by converting these into profitable assets with finance and execution.
Kotak Realty Fund has so far raised 11 funds and invested in 60 projects and companies across commercial office, residential, retail, industrial and hospitality sectors. The fund has been investing in projects of developers with execution track record and established brand equity to ensure scalable and risk-adjusted returns.