IL&FS, Milestone launch real estate fund

For those who do not have time and where withal and also do not have the knowledge and nitty gritties of the real estate sector, there is a good news from IL&FS Investment Managers and Milestone Capital Advisors who have launched a real estate fund. The brief summary of the fund:-

• Description of the Fund: IL&FS-Milestone Fund-I is an yield-driven real estate investment fund based on a structure similar to the real estate investment trusts (REIT). Worldwide it is the most popular investment route for corporates and individuals to invest in real estate.
• Scheme: It is a close-ended scheme with a lock in period of four years, with an option to extend the term by a year and if required by one more year.
• Fund Size: The fund is targeting a corpus of Rs 1,000 crore, which includes a greenshoe option of Rs 500 crore.
• Last Date for Initial Offer: The fund will remain open for subscription till October 30, 2007.
• Minimum Investment: It will be the first real estate investment fund in India to offer a low minimum investment commitment of Rs 10 lakh for individuals (in multiples of Rs 5 lakh thereafter) and Rs 1 crore for corporates, with the convenience of draw-down spread over 12 months.
• Distribution of Profits: IL&FS-Milestone Fund-I will offer a quarterly yield distribution to investors and property appreciation benefits in the long term. The fund is targeting an annual yield of 11% (pre-tax) and an internal rate of return of 18-20% (pre-tax) with property appreciation.
• Portfolio: The funds raised in the initial public offer at par would be invested in office buildings, hospitals, hotels, warehouses and shopping malls. The managers would invest 30 per cent each in retail and office properties, 20 per cent in IT and ITeS and 10 per cent each in warehousing and office properties.

CONTACT DETAILS

IL&FS Investment Managers Limited

Mumbai

The IL&FS Financial Centre

Plot No. C - 22, G Block,

Bandra Kurla Complex,

Bandra (East),

Mumbai 400 051

Phone: +9122-2653 3333 / 2653 3232

Fax: +9122-2653 3056

Bangalore

Aum Plaza

1st FloorNo 76, 3rd Cross

Residency Road

Bangalore 560 025

India

Phone: +9180-4034 3333

Fax: +9180-4034 3310

Contact Email: sanjay.mitra@ilfsindia.com

Related News:-

• IL&FS, Milestone launch real estate fund - The Economic Times - September 10, 2007
• IL&FS, Milestone open door for realty investment - The Economic Times - September 11, 2007

The Government is liberalising the FDI policy in Real Estate MFs

The government is considering allowing Foreign Direct Investment (FDI) up to 49% and tax benefits for real estate mutual funds. SEBI is in final stages of framing guidelines for products that will alow retail investors enjoy the benefits of owning a slice of the ever booming Indian real estate market. Internationally, real estate mutual funds are called Real Estate Invetsment Trusts - REITS in short. REITs are companies that buy, sell manage and develop real estate assets.

Much like mutual funds, REITs put together the investments of many individuals and institutions and then deploy this money in real estate. So, people wanting to have a pie in the real estate growth phase mo do so now by buying hsares in REIT or units in real estate MFs.

The main area of concern is disclosure norms and valuation of real estate assets of these mutual funds. It is difficult to value a property on regular intervals like day-to-day unlike other equity and money market instruments. Besides, valuations would depend on the valuer. The market regulator is expected to extend some of the strict disclosure and valuations proposed for real estate IPOs to real estate mutual funds as well. The advisory committee is suggesting a period not more than two months for declaring net asset values and portfolio. In line with real estate IPO norms, the projection of the value of the land may be made only on the present "realisable" value instead of the future projection.

Officials from the legal department of SEBI, a couple of key officials of HDFC Mutual, representatives from the Institute of Charted Accountants of India (ICAI), The Association of Mutual Funds in India (AMFI) and a SEBI nominated independent CA have been meeting over the past few months to finalise rules about disclosures and accounting standards to be adopted. The SEBI is also expected to announce which entities would be allowed to launch such a fund and the minimum investment amount for the investors.

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