Kotak Performing RE Credit Strategy Fund II IFSC

Kotak Mutual Fund

Established in 1985 by Mr. Uday Kotak, it was thefirst Indian non-banking financial company to be given a banking license by the Reserve Bank of India in February 2003. The group caters to the financial needs of individuals and institutional investors across the globe. Kotak Mahindra Group (Group), founded in 1985, is one of India's leading financial services conglomerates. In February 2003, the Reserve Bank of India (RBI) granted Kotak Mahindra Finance Ltd. (KMFL), the Group's flagship company, a banking license, making it India's first non-banking finance company to convert into a bank - Kotak Mahindra Bank Ltd. The Group provides a broad range of financial services that cover all aspects of life. The Group offers a wide range of financial services to individuals and businesses, including commercial banking, stockbroking, mutual funds, insurance, and investment banking. The Group has a large distribution network that includes branches and franchisees throughout India, an International Business Unit at DIFC in Dubai, and international offices in London, New York, Dubai, Abu Dhabi, Mauritius, and Singapore. Kotak Mahindra Bank is the flagship company of the Kotak Mahindra Group, a leading financial services conglomerate headquartered in Mumbai, India. About Kotak Mahindra Bank - GIFT City Branch Kotak Mahindra Bank established its International Financial Services Center Banking Unit [IBU] in Gujarat International Finance Tec (GIFT) City on May 3, 2016. GIFT is India's first global financial and IT services hub, designed in the style of global financial centers and overseen by the International Financial Services Centres Authority. The branch serves a global customer base and offers a diverse range of products and services, including deposits, loans and advances, and treasury services.

Fund Snapshot

Fund Attribute	Details
Fund Name	Kotak Performing RE Credit Strategy Fund II IFSC
Fund Manager	Kotak Alternate Asset Managers Limited (KAAML)
Regulatory Authority	International Financial Services Centres Authority (IFSCA)
AIF Category	Category-II AIF (Alternative Investment Fund)
Registration Number	IFSC/AIF2/2023-24/0071
Date of Registration	October 25, 2023
Legal Address	6th Floor, Unit 647, Signature Building, Block 13-B, Zone 1, GIFT City, Gandhinagar, Gujarat
Base Currency	US Dollar (USD) / Compliant Foreign Currencies
Target Audience	Offshore Institutions, Sovereign Wealth Pools, and Global Family Offices / UHNIs

Fund Overview

The Kotak Performing RE Credit Strategy Fund II IFSC is a closed-ended Private Credit real estate vehicle. While opportunistic funds seek high equity upsides through speculative land development, a Performing Credit fund acts as a structured lender. It targets high-yield debt solutions for developers whose projects are already hitting solid operational, construction, or sales milestones.

By nesting this vehicle in the GIFT City IFSC, Kotak gives international allocators a highly fluid operational canvas. Limited Partners (LPs) draw down and receive distributions completely in foreign currency (typically USD), insulating them from domestic onshore onboarding friction, multi-layered regulatory paperwork, and fundamental local currency conversion blockages.

Investment Philosophy

Kotak Alternate Asset Managers runs this strategy under a defensive, cash-flow-first mandate built around structural risk control:

Underwriting Real Cash Flows (Performing over Distressed): The core strategy rejects distressed or unapproved real estate risk. Instead, it looks for “performing” real estate—such as ongoing construction execution or locked-in leasing pipelines—where risk can be quantitatively modeled on active project velocity.
Capital Protection via Structured Senior Collateralization: The fund acts as a senior or mezzanine secured lender. Transactions are heavily structured with powerful downside shields, including high collateral cover ratios (often backed by prime underlying land or inventory), corporate and promoter guarantees, and escrow accounts that capture project revenues before developers can access them.
Addressing the Traditional Banking Supply Gap: Due to strict local regulatory limitations, standard commercial Indian banks are restricted from providing flexible financing for real estate activities like inventory refinancing or last-mile execution capital. Kotak captures this premium alpha space by providing institutional-grade corporate financing solutions at attractive double-digit internal rates of return (IRR).
Pre-Agreed, Bulletproof Liquidity Pathways: The fund mitigates long-term capital lockups by integrating structured exit milestones directly into the loan underwriting phase. This includes capturing project escrow cash allocations, pre-defined refinancing agreements, and structured developer buyback obligations.

Fund Manager

Uday S. Kotak

Uday S. Kotak is the Chairman and Non-Executive Director of the Company, plus he founded and directs Kotak Mahindra Bank Limited. He used to be the Bank's Managing Director and CEO until September 2023. Now, he's in a non-executive position, still helping steer the bank's future. He has almost 40 years of experience and was a key player in growing the Kotak Mahindra Group into one of India's top financial service groups. They do all sorts of things like banking, asset management, insurance, and capital markets. People think of Mr. Kotak as someone who really helped shape India's financial scene. He's been in charge of the Indo-UK Financial Partnership and been on global advisory boards. He's also headed big governance projects and won a bunch of awards for his career and business smarts. He got his bachelor's degree in commerce and an MMS from JBIMS, Mumbai.

Frequently Asked Questions

What does "Performing Credit" mean in a real estate fund context? +

Performing credit implies that the fund is deploying capital into real estate assets that have already surpassed basic planning risks and are generating—or are highly close to generating—stable operational velocity. The fund acts as a structured corporate creditor, collecting strong, predictable yield payments rather than guessing on equity stock values.

What real estate micro-markets and asset classes does this fund look at? +

The mandate targets premium commercial workspaces, Grade-A IT parks, and tier-1 execution-driven residential projects. Geographically, it restricts exposure to core micromarkets experiencing high demand within India’s dominant economic clusters (e.g., Bengaluru, Mumbai, Pune, Hyderabad, and the National Capital Region).

What is the regulatory minimum investment required for individual allocators? +

According to the unified rules set by the International Financial Services Centres Authority (IFSCA) for Category-II AIF setups in GIFT City, the minimum commit size for a qualified individual investor stands at $150,000 USD (or its matching equivalent in other global convertible currencies).

How does this fund safeguard investor capital against developer default? +

Every line of credit extended by the fund undergoes institutional credit vetting. Deals are secured via multi-fold asset backing, direct share pledges of target entities, personal developer guarantees, and strict cash-flow trapping via locked escrow banking structures.

What are the main tax benefits of using the GIFT City route for this credit fund? +

By utilizing a Category-II AIF in GIFT City, non-resident institutional and private investors enjoy a highly advantageous tax pass-through structure. Foreign allocators are generally shielded from localized Indian surcharges and escape the massive administrative income-filing overhead associated with traditional onshore investments, with withholding taxes optimized via global Double Taxation Avoidance Agreements (DTAA).

Get In Touch