Motilal Oswal IREF II Fund Achieves 18.3% IRR with Complete Exit - Real Estate Investment Success

Motilal Oswal Alternates has successfully completed its exit from the India Realty Excellence Fund II (IREF II), marking a significant milestone in India's real estate private credit landscape. The fund management company reported that it had divested all 14 properties in its portfolio, generating a gross Internal Rate of Return (IRR) of 18.3% and total exit proceeds of ₹1,050 crore from an initial corpus of ₹489 crore.

The achievement comes at a time when India's REIT market continues to show strong growth and institutional investors are increasingly looking at property investment alternatives to mutual funds.

Fund Performance Highlights Resilience in Challenging Market

The IREF II fund's performance was particularly noteworthy given the numerous market disruptions it weathered during its lifecycle. Industry experts noted that the fund successfully navigated through several major challenges including demonetization, RERA implementation, GST rollout, NBFC credit squeeze, and COVID-19 related slowdowns.

According to the fund managers, the ₹489 crore initial funding was deployed across mid-income residential projects developed by established players such as Kolte Patil, Casagrand, and Shriram Properties. The strategic focus on established real estate markets and growth zones appeared to have paid dividends for investors.

Strategic Approach Underpins Success

Motilal Oswal Alternates attributed the fund's success to several key strategic factors. The company emphasized its active asset management approach, which included early stress detection, swift collaboration with developers, and focused governance protocols.

The fund management team also highlighted how diversification across cities and developers helped mitigate concentration risk. This approach becomes particularly relevant as Tier 2 cities emerge as major investment opportunities in India's real estate sector.

Industry observers noted that the fund's capital protection philosophy and disciplined underwriting standards played a crucial role in achieving consistent returns despite macroeconomic headwinds.

Broader Portfolio Impact and Market Position

The successful closure of IREF II adds to Motilal Oswal Alternates' expanding real estate portfolio, which now manages over ₹10,000 crore across six funds. The company reported a track record of 180+ investments and 110+ exits, with total assets under management in real estate and private equity surpassing USD 2 billion.

Market analysts pointed out that this performance comes as several factors are making Indian real estate particularly attractive to institutional investors.

Leadership Perspectives on Fund Success

Vishal Tulsyan, Co-founder & Chairman of Motilal Oswal Alternates, described the success as proof of disciplined investing and effective governance. He expressed confidence in the company's positioning within India's evolving real estate sector.

Saurabh Rathi, MD & Co-Head, emphasized the importance of proactive asset management and highlighted how diversification strategies provided the fund with a competitive edge. Meanwhile, Anand Lakhotia, MD & Co-Head, credited investor trust and the fund's resilience despite facing significant macroeconomic challenges.

Future Outlook and Market Implications

The success of IREF II has broader implications for India's real estate private credit market. Industry experts suggested that such performance benchmarks could increase institutional capital flows into structured private credit for housing projects.

Motilal Oswal Alternates has already launched IREF VI with ₹1,750 crore raised, targeting mid-income housing across eight metros. This development aligns with broader trends where affordable housing continues to face challenges but also presents opportunities for structured funding solutions.

Investment Insights for Market Participants

The 18.3% IRR achieved by IREF II positions it favorably compared to many traditional credit funds, according to market analysis. Fund managers emphasized that MO Alternates' decades-long experience and robust on-ground expertise serve as key differentiators in the competitive landscape.

With IREF VI currently deploying capital and favorable market conditions persisting, the company suggested that momentum in the real estate private credit space is likely to be sustained. This development is particularly relevant for investors evaluating real estate investment options in 2025.

Market Benchmark and Performance Standards

The IREF II closure represents more than just a successful fund exit, according to industry commentators. The generation of ₹1,050 crore from initial ₹489 crore investments, delivering an 18.3% IRR, establishes a performance benchmark for future real estate credit ventures in India.

Market participants noted that this success story demonstrates how disciplined, active credit investing in housing can thrive despite macroeconomic hurdles. The achievement strengthens the path ahead for similar funds and reshapes institutional finance's role in India's housing narrative.

The performance also comes at a time when technology is transforming the real estate sector, potentially creating new opportunities for both traditional and alternative investment approaches.

Frequently Asked Questions

What was the IREF II fund structure?

IREF II was a ₹489 crore domestic real estate credit fund managed by Motilal Oswal Alternates, specifically focused on providing structured capital for mid-income housing projects across India.

How did the fund perform financially?

The fund delivered a gross Internal Rate of Return (IRR) of 18.3% by successfully exiting all 14 of its property investments, generating total proceeds of approximately ₹1,050 crore.

What distinguishes MO Alts in real estate credit?

Key differentiators include active asset management capabilities, strong developer relationships, geographic diversification strategies, and a capital protection-focused investment philosophy.

What are the company's future plans?

Motilal Oswal Alternates has launched IREF VI with ₹1,750 crore raised and continues deploying capital across mid-income housing projects in major Indian cities.