Looking at raising a rental yield fund: Indiareit Fund

In an interview to CNBC-TV18, Ramesh Jogani, managing director, Indiareit Fund said, real estate markets, both residential and commercial, are not very good, across India and in particular Mumbai.

He further said, Indiareit Fund is looking at raising a rental yield funds. "It is basically annuity income. We are getting into a more conservative kind of an investment where we would invest into properties which are fully built out, fully leased out. We see a fair bit of appetite in this space." Below is the edited transcript of his interview with CNBC-TV18's Sonia Shenoy and Mitali Mukherjee. Also watch the accompanying video. Q: What kind appetite you are seeing for your fund and whether interest is still high on some of the Indian realty projects? A: Right now, we are looking at raising a rental yield fund. What does rental yield fund mean to an investor? It is basically annuity income. Because of high stress in development or core real estate, we are getting into a more conservative kind of an investment where we would invest into properties which are fully built out, fully leased out. So, for our investors, they would get annual income without really taking the risk of sanctions and development. So, we see a fair bit of appetite in this space. Q: Since you have a check on the pulse of the market, can you give us an indication of what's happening in terms of property prices? What is the main reason why you have chosen to get into the rental yield segment rather than commercial property offtake etc? Is there a big slowdown that we are seeing in terms of prices? A: The slowdown has been there since some time, it's been over last two-three years. Because of the global recessionary trends all over, we have not seen a huge off take in the commercial market. So, it does not really make sense for investor of a fund to go into development of commercial properties. So, to eliminate that risk you get into the properties which are already leased out. On our part, we are not taking any real risks. These are properties which are leased out and people want more conservative returns and this would give them 10-11%. So, for sure, the markets are not very good, both residential and commercial across India and in particular Mumbai. Q: What is the response that you have got on your road shows? I understand that you are looking to raise some money by investing in residential properties as well, can you give us a check on that? A: Since the markets are not very good, it means that many more opportunities. So, you get structured kind of investments where you are putting money, you are getting preferred returns and your investment is much safer. It's equity investment, but at the same time it's linked with minimum coupon. So, those opportunities are available in plenty and that's where we are going to invest in.