hBits to Raise Rs 500 Cr for Real Estate AIF by 2025

New Delhi, Nov 26 (PTI) hBits Asset Management, a wholly-owned subsidiary of fractional ownership platform for commercial real estate hBits, is planning to raise Rs 500 crore under its AIF (alternate investment fund) by March 2025, a top company official said.

"We started the marketing process for AIF recently, about a month ago, and already have about Rs 50 crore in soft commitments. So the idea is to reach first close by March and then close out the fund maybe in 9 to 12 months to raise the full Rs 500 crore," hBits Founder and CEO Shiv Parekh told PTI.

Parekh informed that he is targeting about Rs 200-250 crore by March 2024, before the first close of the AIF.

"... By March, once we do the first close, we should start acquiring properties for the AIF in the new financial year (2024-25)," he said.

He further noted that the minimum ticket size for investment in the AIF is Rs 1 crore and it is open for individual investors, institutions, and foreign institutions.

"We are targeting HNIS (high net worth Indians), family offices and institutions to invest in the AIF," he stated.

He also explained that it is a closed-ended fund and invested capital would be returned back to the investor after seven years.

The fund was recently launched by hBits Asset Management and there is no upper limit on investment.

On geographies for investment, he said the firm is looking at top six cities for investment in commercial real estate including Mumbai, Pune, National Capital Region, Bangalore, Hyderabad and Chennai.

The company is looking at basically offices and warehouses primarily as well as data centers.

The offices and warehouses component in the AIF will be 50 per cent in 'under-construction' and 50 per cent in 'constructed', OC (occupation certificate) received and rented-out categories.

So, in pre-leased, the fund will make about 15 per cent internal rate of return (IRR) and then it will add some leverage to it so that it will go up to 17 to 18 per cent. "In under-construction the fund makes 22 per cent IRR. So when you average it out, it's about 20 per cent IRR," he said.

In financial analysis, IRR is used to estimate the profitability of potential investments.

On the demand of the commercial real estate, he said it is doing tremendously well right now.

"During COVID, no one constructed anything new because there's this whole question about offices. But in India, back to the office has happened pretty much 90 to 95 per cent. Everyone is back to the office. We are not like the American market, where people can work from home," he said.

Pointing towards issues such as the internet infrastructures, joint families, he stated that the work from home concept doesn't work in India.

"So right now, in 2023, leasing demand in office space has been amazing and rentals have shot up. Similarly in warehousing, with the growth of e-commerce, all the Grade A warehouses are taken up across the market," he added.