Kotak Investment Advisors secures $500 million first close from ADIA for $1 billion realty fund

Kotak Investment Advisors, alternate assets business manager of the Kotak Mahindra Group, has achieved the first closure of its $1 billion or Rs 8,136 crore real estate fund through a secured commitment from the sovereign wealth fund Abu Dhabi Investment Authority (ADIA).

Domiciled in Gujarat’s GIFT City, this is Kotak’s 13th real estate fund that will primarily invest in residential properties across India’s key cities.

It has secured an anchor investment of $500 million or over Rs 4,068 crore from a wholly-owned subsidiary of ADIA taking the sovereign fund’s investment in Kotak Realty Fund to $1 billion in less than six months.

Prior to this, Kotak Investment Advisors entered into an alliance with an ADIA entity to set up a $590 million or over Rs 4,800 crore real estate investment platform in June this year.

The fund, which will be domiciled in Gujarat’s GIFT City, will be investing in office assets across India focusing on the top six property markets of Mumbai, Bangalore, Delhi-NCR, Pune, Hyderabad and Chennai.

“This is an opportunistic fund which can invest across various real estate asset classes and capital stack i.e. both debt and equity. The Fund will primarily target investments in residential real estate. With the first close of this fund, Kotak Investment Advisors has raised around $1.5 billion in real estate across multiple strategies in around one and a half years,” said Vikas Chimakurthy, CEO, Kotak Realty Fund.

With this new fund, Kotak Investment Advisors has raised, managed, or advised more than $3.3 billion under its real estate fund series.

“As an India focused alternate asset manager, Kotak has played a key role in attracting global capital to various alternate asset investment strategies in India. Kotak’s Real Estate Investment practice has been a consistent performer over 17 years across cycles and strategies,” Srini Sriniwasan, MD, Kotak Investment Advisors.

According to him, this track record has enabled Kotak Investment Advisors to emerge as a leading home-grown alternate asset manager with a significant global limited partner base who have reposed faith multiple times with Kotak with significant participation in successor funds.

“This agreement extends our existing and longstanding relationship with Kotak. The new platform is primarily targeted at the significant demand for housing in India, which is driven by sustained economic growth and a shortage of urban housing clusters,” said Mohamed AlQubaisi, Executive Director of the Real Estate Department at ADIA.

This is ADIA’s fifth relationship with Kotak Investment Advisors for Indian real estate assets. Separately, the UAE-based sovereign wealth fund has also committed $500 million earlier to a distressed fund backed by the largest home-grown alternative assets’ investment major in India.

Set up 2005, Kotak Investment Advisors is part of Kotak’s alternate assets practice and has raised, managed, and advised in aggregate over $6.8 billion across different asset classes including real estate, private equity, infrastructure, special situations fund, and investment advisory.

Established in 1976, the Abu Dhabi Investment Authority is a globally-diversified investment institution that invests funds on behalf of the Government of Abu Dhabi through a strategy focused on long-term value creation.

Against the backdrop of an ongoing policy overhaul, rising investor confidence, enhanced transparency, and sustained growth in demand for grade A commercial office space, experts believe the investment momentum in the Indian real estate sector will continue to rise.

ADIA’s investment indicates the appetite for Indian real estate assets among global institutional investors continues to be strong. In addition to large and established domestic investors, global funds like Blackstone Group, Brookfield Asset Management, GIC, Xander, Ascendas, CPPIB, Warburg Pincus and Goldman Sachs are expanding their investments in the sector.