Essel Financial Services through its private equity (PE) arm, Essel Fund, is all set to start its first real estate fund with a Rs.500cr corpus meant to be invested in residential projects in large cities across the country, said Managing Director & Chief Executive, Amit Goenka, adding that the fund, being raised from domestic investors, includes an option to raise another fund of similar amount. Real estate players normally turn to PE firms and other non-traditional sources for money as banks became wary of the sector because of the various troubles such as delay in approvals and starting construction work, which slows the pace of sales in a weak economy.

In the prevailing scenario, PE firms, while capitalizing on the need for funds, too are cautious of the sector and have focused on investing in residential projects as these have proved to be more reliable than office space developments. The Essel fund, India Asset Growth Fund-Series I, Annuities in Senior Secured Estates Transaction, is managed by Essel Finance Advisors and Managers, a part of the holding company Essel Financial Services. It recently got a licence from capital markets regulator Securities and Exchange Board of India (Sebi). The firm will offer last-mile funding to residential projects, largely in the form of debt financing, he added.