The Indian Real estate industry is undergoing a transformational change with the opening up of newer avenues of investment in the form of Alternative Investment Funds (AIFs) for the retail investors. These are fast becoming popular with the investor class owing to the high return on investment and tax benefits it offers and have emerged as a new secure way of investing.
According to the Securities and Exchange Board of India (SEBI), an Alternative Investment Fund or AIF means any fund established or incorporated in India which is a privately pooled investment vehicle which collects funds from sophisticated investors, whether Indian or foreign, for investing it in accordance with a defined investment policy for the benefit of its investors. Among the three categories of AIFs, AIF II invests primarily in equity and debt securities and includes private equity funds, funds for real estate funds, debt funds, fund of funds and also distressed assets.
Industry numbers show that the Indian AIF industry is standing at Rs 6.4 lakh crore commitments raised as on 31st March 2022, a whopping 7x growth in the last 5 years with investments in Category II accounting for almost 80 percent of all investments.
Industry data suggests that AIFs gave an average category returns of 13.6% -30.6% in 2021-22, making it one of the preferred modes of investment in the past decade. Savvy investors have used this route to deploy their wealth in categories most others are not even aware of.
BHIVE, one of India’s fastest emerging wealth tech platforms, has announced the launch of its 400 crs Commercial Real Estate Opportunities Fund which is a SEBI Approved CAT II AIF Scheme.
“The rapid return to work across corporates and tech companies, and their preference for a more flexible office space model has created a unique opportunity for investors. Indians have always been investing in Real Estate. This has however mostly been in residential where returns are low. We are facilitating investments into Commercial Real Estate which was earlier inaccessible to most.” Sandeep Gupta, CIPM, CFA – Partner, BHIVE Fund.
Investors with a minimum investment of Rs 1 crore will get to invest in prime commercial assets, which earlier was out of bounds for most investors due to high investment level. It has already received commitments of Rs 200 crore, mainly from various classes of retail investors and family offices.
Shesh Paplikar – CEO BHIVE Group shares “ BHIVE is one of the oldest office operators in Bangalore and now operates 9 lac sq ft of space across 17 locations. We have proven expertise and track record in Commercial Real Estate and can generate a return of 20 – 24 % p.a for the investors of this fund. The money is only invested in completed buildings with OC and clear title of underlying land. Since no leverage is taken, the risk is low for this scheme”.
Factors behind the rise in popularity of Alternative Investment Funds
With the fall in yields from traditional investment classes such as Fixed Deposits, PPFs, EPFs, etc. and volatility in the stock market, investors are now looking for newer avenues which offer high returns as well as tax savings. SEBI has allowed a pass-through tax status for AIF II which allows for the tax to be levied on the income in the hands of the investors as part of their annual income and not at an entity level.
This apart, India is one of the fastest growing commercial real estate markets with around 601 million square feet of prime office spaces as on Q1, 2022, according to international property consultant Colliers. Post COVID, there has been a strong pick-up in demand led by large-sized deals of over 100,000 square feet and office space supply has doubled year-on-year to 14.3 million square feet in the same quarter, indicating consistent growth in rentals and an opportune time to invest in commercial real estate.
This enables the investors to diversify their portfolio in a seamless manner and particularly attracts the new age investors who are looking for investment avenues without hassles of management of tenants. BHIVE’s AIF offers a full stack solution – from property sourcing, legal due diligence, purchase process, property possession, maintenance and revenue generation and finally investment exit – helping build confidence among investors.
