The Fund
The goal of the fund is to pool together investments from investors who want to take advantage of the growth of the Indian real estate sector but lack the time and energy to navigate the finer details of the Indian property market, or whose investment size is insufficient to make advantageous acquisitions. The close-ended fund will be offered to a small number of investors and will have a portfolio allocation similar to that shown below:
| Commercial property | 50% |
| Residential developments | 25% |
| Land | 20% |
| Cash / Liquid Funds | 5% |
The geographic spread of the investments will be determined by locating urban regions which are perceived to be priced favourably as compared to more developed urban or city areas. Currently, projects are being targeted in the high growth areas of Gujarat such as: Ahmedabad, Surat, Vadodara and Rajkot where there is substantial scope for urbanisation due to intensive infrastructure investment by the local government. Other regions will be examined to ensure adequate diversification of the assets.
The fund will be located in Mauritius due to its favourable double taxation treaty with India which will help to maximise the returns for investors by reducing any tax liabilities on capital gains or dividends. It is expected that the fund will have a lifespan of between 5 and 7 years to take advantage of the expected growth of the Indian economy but no longer than 10 years and it does not intend to pay a dividend until the assets are disposed.
Currently, commercial property in India (depending on location & tenant) can generate annual rental income in the region of 9-13 % in addition to incremental capital growth. Land valuations in new urbanised areas close to the cities have been rising at the average rate of 15-20% p.a. over the last 5 years.
