Anand Rathi and Knight Frank to launch their second realty fund in September

MUMBAI: Financial services institution Anand Rathi Financial Services and real estate consultant Knight Frank will launch their second real estate fund in September. The Anand Rathi - Knight Frank combine intends to raise about Rs 400 crore in the fund.

"The fund will invest in pre-leased commercial space. Much like the first fund which collected over Rs 250 crore, the second fund will invest in commercial properties across top cities," said Amit Rathi, managing director of Anand Rathi Financial Services.

The fund will be capitalised with investments from domestic retail investors; it will invest in top cities like
Mumbai, Delhi, Bangalore and Chennai.

Rental yield, as a concept, is gaining popularity among affluent investors. According to real estate managers, investors are buying leased out property or newly-constructed space directly only to let them at current rates. The advantage of buying leased property is that the quality of tenant will have a bearing on rental yields and asset value.

So, if the tenant is an established bank, rental yields will be relatively lower in the range of 7.50-8.50%. Property leased out to quality tenants also commands higher market value.

Also, almost all leased out properties have an escalation clause which states that rents could go up by 10 - 15% once in every two - three years. This puts the investor in a sweet spot as he is sure his rental yield will grow in the years to come. And over a longer term, if the investor sees an increase in his asset value, he can sell the space at higher rates and pocket capital gains.