Synopsis

ICICI Prudential AMC is raising a Rs 2,000 crore fund for Mumbai residential development. This fund targets redevelopment opportunities in established prime locations. It will focus on projects with strong connectivity and limited competing supply. The fund aims for a gross internal rate of return of 20-25%. Investors are keen on participating in Mumbai's property market through this fund.

The fund size includes a green-shoe option of Rs 1,000 crore and has a tenure of six years.

Mumbai: ICICI Prudential Asset Management Company is raising a Rs 2,000 crore residential development fund focused on Mumbai property market as the housing market in the India’s financial capital sees sustained absorption and redevelopment emerges as a key source of new supply in established locations.

The fund size includes a green-shoe option of Rs 1,000 crore and has a tenure of six years. It is structured as a close-ended Category II Alternative Investment Fund (AIF) and is targeting a gross internal rate of return (IRR) of around 20-25%.

Also Read: Prudential to acquire 75% stake in Bharti’s insurance business for Rs 3,500 crore

ICICI Prudential Residential Development Fund will focus primarily on residential projects in the Mumbai Metropolitan Region (MMR), particularly in prime micro-markets where land availability for greenfield development is constrained. The investment strategy identifies redevelopment of existing housing societies as the primary development route in several key locations.

“The Mumbai property market, particularly the residential segment, continues to see demand for projects by established developers. With this fund, we are looking at development and redevelopment opportunities in the city and the requirement for upfront capital in these projects. The initial response to our fundraising has been robust,” Rohit Rathi, Principal - Real Estate Business, ICICI Prudential AMC, told ET.

According to him, the response from Mumbai as well as other cities, including tier-II cities, has been strong, clearly showing that investors are keen on owning a slice of the Mumbai property market without owning an asset directly.

Between 2020 and 2025, more than 1,100 society-level redevelopment agreements were recorded in Mumbai, unlocking around 432 acres of land. The financing requirement begins before construction, including society payouts, transit accommodation, premiums and approvals, while banks and NBFCs typically participate later at the construction finance stage. This is creating a requirement for capital at an earlier stage of the development cycle.

Also Read: ICICI Pru Life seeks investor status for Prudential after Bharti Life deal

The fund will invest alongside established developers, with a focus on projects in locations with strong connectivity, high absorption and limited competing supply. For society redevelopment projects, it will consider opportunities where development agreements have been signed, clear title is established and legal due diligence has been completed.

Under the proposed structure, the fund will contribute 60-70% of the investment in a project entity, while the developer will contribute 30-40%. The investment manager will undertake independent technical, financial and legal diligence, monitor project execution and oversee cash flows and deployment.

The fund will target HNIs, family offices and institutional investors. Exposure to a single developer group will be capped at 50% of the fund corpus and a single project at 25%.

According to Rathi, the Office Yield Optimizer Fund has invested in pre-leased commercial assets across Mumbai, Pune and Bengaluru, and the Residential Development Fund will build on its focus on real estate investments.

ICICI Prudential AMC has invested around Rs 6,000 crore across eight real estate funds and portfolios over the past 15 years, including five residential-focused and three commercial funds.

The fund is targeting an average project holding period of around 3.5-4 years and a multiple of around 2x on invested capital. The targeted 20-25% IRR is a gross return before fees and expenses and is not guaranteed.