SMARTOWNER CAPITAL GROWTH FUND - I 
FAQs 
 
 
 
 
 
 
 
 
 A. Definitions, Portfolio & Key Terms 
  
1. What is the category of the fund’s registration with SEBI? 
The Fund is a Category II Alternative Investment Fund, registered with SEBI. 
  
2. What is the term of the fund?  
The Fund is a closed-end fund, and the Term of the Fund is 5 (five) years from 
the date of Final Closing. The Term of the Fund may be extended by two 
additional one-year periods, or any further periods in accordance with AIF 
Regulations. 
 
3. What types of developers does the fund look for?  
The Fund will look for credible developers who have demonstrated superior 
execution capability and strong sales and marketing expertise.  
 
4. What types of instruments does the fund intend to invest in? 
The Fund’s focus is on generating superior total returns. A key focus area of the 
Fund is to invest in opportunities in or related to the real estate sector. Such 
investments may be structured as non-convertible debentures or other 
securities. The Fund may also invest in other types of securities of listed and 
unlisted companies, including those of associate companies, with prior 
approval of investors, in order to achieve the same purpose of generating high 
total returns. All investments of the Fund will be in compliance with AIF 
Regulations and subject to the discretion of the Investment Manager, who will 
make such allocations based on available opportunities. 
  
5. What is the average investment amount that the fund intends to make per 
opportunity or project?  
The Fund intends to make investments of an average ticket size of INR 80-250 
crore but may make investments of other transaction sizes depending on the 
opportunity. 
  
6. By when can we expect the capital to be deployed?  
The drawdown will be called for by the Investment Manager based on available 
opportunities, so the capital should be deployed within a few weeks of the last 
date for drawdown payment. 
  
7. Why does a developer raise money from the fund instead of raising it directly 
from banks? 
Developers raise money from multiple sources and each has its advantages 
 
 and restrictions. Bank lending is highly regulated and subject to conditions such 
as restrictions based on the industry to which loans are provided. In the current 
context, most developers prefer to raise capital from Alternative Investment 
Funds instead of banks due to the advantages of such funds versus the banks. 
  
8. How much interest income does an investor earn on a quarterly basis? Will 
the payouts be on a monthly/quarterly/half-year basis? 
The Fund does not have a specific mandate to invest in rental/interest yielding 
instruments or projects. The Investment Manager, however, may take a call on 
investing in such rental/interest yielding instruments should they seem 
attractive from an IRR perspective. There may/may not be any quarterly or 
regular interim payouts in the Fund at all as the primary focus of the Fund is 
maximum total returns and not quarterly yield. Structured equity or NCD 
investments would typically have a duration of around 3-5 years. 
  
9. What is the indicative drawdown structure for the fund? 
Upon execution of the Contribution Agreement, the Unit-holder shall make 
Capital Contribution of an amount equal to at least 30% of his Capital 
Commitment or such amount which may be determined by the Investment 
Manager at its sole discretion. All other drawdowns will be on an as-needed 
basis as and when determined by the Investment Manager based on available 
investment opportunities. 
  
10. What is the drawdown period?  
The Commitment Period starts from the date of the Initial Closing and 
terminates upon the completion of 18 months from the date of the Final 
Closing; although the Investment Manager may, at its discretion, extend the 
Commitment Period by an additional period of 12 months. 
  
11. What would be the notice period given to investors to make their 
contribution?  
The Contributors will have to make the Capital Contributions within 30 days 
from the date of the Drawdown Notice. 
 
12. If there is any delay by the investor in paying the drawdown, what is the 
penalty?  
The Investment Manager shall notify the Defaulting Contributor to pay the 
outstanding amount along with interest calculated at a rate of up to 18% p.a. 
(compounded annually), commencing from the due date of the Drawdown and 
ending on the date on which such payment has been received by the Fund. In 

 
 the event the Defaulting Contributor continues to default, the Investment 
Manager, at its discretion, may also take additional actions as provided under 
the Contribution Agreement. 
*For details, please refer to the Contribution Agreement. 
 
13. What is the maximum AUM the fund can raise?  
The Fund can raise INR 500 crore, with a greenshoe option, exercisable at the 
discretion of the Investment Manager, of INR 500 crore, thereby totalling INR 
1000 crores. 
  
14. What is the target return pre-expenses? 
The target return for the Fund pre-expenses at transaction level is 20%-24%*. 
*​Returns are dependent on Fund performance, prevalent market factors, liquidity and credit conditions. The targeted 
returns are purely indicative and are not promised or guaranteed/assured in any manner. 
 
15. What is the sponsor investment in the fund?  
The Sponsor shall make a Capital Commitment of INR 5 crores or 2.5% of the 
total commitment, whichever is lesser, as per SEBI regulations. 
 
16. What is the hurdle rate for the investor?  
The Hurdle Rate will be a pre-tax IRR of 10% p.a. computed in INR. 
 
17. Will the investor get any fixed returns?  
The Fund is not a fixed return investment and therefore any return is subject to 
investment performance. The targeted returns are purely indicative and are not 
promised or assured in any manner. 
 
18. Who can invest in the fund?  
Any person or entity who is eligible to invest in a Category II AIF can invest in 
the Fund. Such persons and entities include financial institutions, pension 
funds, family offices, banks, insurance companies, high net worth individuals, 
non-resident Indians (NRIs) and foreign investors, trusts, partnerships, limited 
liability partnerships, body corporates,Hindu Undivided Families, a Government 
body (Central or State) or an agency or instrumentality thereof and any other 
person permitted by law. 
 
19. What types of units will be allotted to Investors? 
Class A Units (sub-classes A1, A2, A3, A4, and A5) will be allotted to all 
investors based on the value of their Capital Commitments. 
 

 
20. What are the capital commitments for the various sub-class A units?  
- Class A1 Units: Contributors making Capital Commitments equal to or more 
than INR 1 Crore to less than INR 5 Crores; 
- Class A2 Units: Contributors making Capital Commitments of equal to or 
more than INR 5 crore to less than INR 10 crores;  
- Class A3 Units: Contributors making Capital Commitments of equal to or 
more than INR 10 crores to less than 25 crores; 
- Class A4 Units: Contributors making Capital Commitments of equal to or 
more than INR 25 crores to less than INR 50 crores; and 
- Class A5 Units: Contributors making Capital Commitments of equal to or 
more than INR 50 crores. 
  
21. What is the value of each unit?  
The face value of each unit will be INR 100. 
  
22. Who can be a joint holder?  
Only the below-mentioned persons can be joint holders of a unit: 
i. an investor and his/her spouse,  
ii. an investor and his/her parent, 
iii. an investor and his/her daughter/son  
  
23. How many people can become joint holders?  
Not more than two persons may act as joint owners of a unit. 
  
B. Taxes 
  
24. What is the tax status for the fund?  
The Fund has a partial ‘pass through’ status and all income paid by the Fund 
shall be taxable in the hands of the investor. For domestic investors, the Fund is 
liable to deduct tax at the rate of 10% on behalf of the investors on all the 
income of the Fund. 
 
In the case of non-resident Contributors, the Fund will deduct tax at the rates in 
force (in other words, tax rates applicable to the investors under the Income 
Tax Act and/or the relevant Double Tax Avoidance Agreement, as the case may 
be, subject to availability of relevant TRC document). 
 
In case Contributors do not have a PAN, the Fund would be required to withhold 
taxes as per the following, whichever rate is highest (i) rates specified in the 
relevant provisions of Income-tax Act; (ii) rates in force; or (iii) 20% (twenty per 
 
 cent). 
  
25. Who will be liable for tax in case of joint Investments? 
For joint investments, the Fund will consider the First Holder as the taxpayer on 
record. 
  
26. After the investment, if the status of NRI changes in any year to Resident 
Indian then how will taxes be applied? 
If the status of NRI or RI investor changes in any particular financial year, then 
the investor has to inform the Investment Manager in writing, based on which 
the investor’s taxability will be reevaluated.  
 
C. Fees/Expenses 
  
27. What fees will the fund charge the investors?  
- Management Fee: The payment of the Management Fee shall accrue and 
commence from the date of Initial Closing. For the drawdown period 
management fees shall be charged upfront on Net Capital Commitment to the 
unit-holders; thereafter it shall be payable in advance on a quarterly basis on 
Invested Capital. 
 

Units  Capital Commitment  Fee (per year) 

Class A1  1 Cr to < 5 Cr  2.50% 
Class A2  5 Cr to < 10 Cr  2.25% 
Class A3  10 Cr to < 25 Cr  2.00% 
Class A4  25 Cr to < 50 Cr  1.75% 
Class A5  > = 50 Cr  1.50% 
*The rates provided are exclusive of all applicable taxes and levies  
 
- Operating expenses will be charged at actuals incurred by the Investment 
Manager and the same will be attributed to the investor's Net Capital 
Contributions. 
 
- Performance fees post hurdle IRR (carry). 
  
28. What is the performance fee the fund charges?  
Performance fees with will be charged to the unit-holders at the following rates: 
Class A1, A2, A3, A4, & A5 – 20% of IRR above the hurdle rate of 10% IRR per 
annum, compounded annually. 
 
 
29. Will the fund take any leverage to make investments?  
As per the AIF Regulations, a Category II AIF cannot borrow funds directly or 
indirectly and shall not engage in any leverage except for meeting temporary 
funding requirements for not more than 30 days, on not more than 4 occasions 
in a year and for not more than 10% of the investable funds. 
  
D. Risk Factors Involved 
  
30. What kind of risk mitigation measures does the fund intend to take? How 
does the fund safeguard investor returns?  
The Fund intends to invest in opportunities in the real estate and allied sectors 
and is therefore exposed to the risks inherent in those sectors, such as the risk 
of project delays, execution risks, vacancy risks, and rental risks. In addition, 
since the Fund intends to focus its investments in India, there are country-level 
macroeconomic, regulatory and political risks, such as the risk of lower than 
expected economic growth, the risk of changes in government policies 
including tax policies, and political instability in the country and the region at 
large. 
 
The Fund has a rigorous evaluation process and the investment committee 
undertakes transactions only when the opportunity meets a detailed list of 
financial, legal, counterparty and project-specific evaluation criteria. The Fund 
intends to use very conservative benchmarks. 
 
The Investment Manager actively monitors the assets of the Fund and takes 
corrective action if required to maximize the likelihood that the investments 
perform as expected. 
 
  
31. In case the developer defaults on payments, how is the fund protected?  
The Fund invests in multiple projects in multiple asset classes within the real 
estate industry, thereby having the benefit of portfolio diversification. In 
addition, the Fund invests in a specific project or opportunity only after carefully 
vetting the project across multiple factors, including an evaluation of the legal 
risk and the availability of significant collateral to support the amount funded. 
Finally, the Fund puts in place financial, escrow and corporate control 
structures to enable the Fund to influence the conduct of its counterparties. 
 
32. Who is the trustee for the fund? 
The trustee for the Fund is Vistra ITCL (India) Limited. 
 
 
E. Exit Options & Term 
  
33. Is there any lock-in period for an investor? 
There is no lock-in period for an investor. However, this is a closed-end fund. 
  
34. If the investor wishes to make an early exit, what are the options available? 
There is no lock-in period for an investor. However, this is a closed-end fund. 
So, if the investor wishes to make an early exit, he will have to find another 
investor who can replace his position in the Fund and transfer the units to him, 
subject to the Investment Manager’s consent and the new investor agreeing to 
the terms and conditions of the Fund. 
  
35. How does the fund plan to exit different investments?  
The exit strategies for different investments of the Fund include, but are not 
limited to:  
- Redemption of NCDs and other securities 
- Sale of securities in the marketplace 
- Refinancing by Developer 
- Buyout by the developers  
- Sale to third parties like investors, real estate investment trusts, real estate 
mutual funds, real estate funds and other alternative investment funds 
- Sale of the underlying assets or collateral 
  
F. Miscellaneous 
  
36. What are the benefits of investing via SmartOwner Capital Growth Fund 1 as 
compared to direct investments in real estate?  
- The ability to have experts select the best investment opportunities 
- The ability to have experts monitor the investment until exit 
- Diversification of portfolio across multiple asset classes, developers, 
projects and geographies 
- Control structures for investor protection that are hard for individuals to 
negotiate 
- Opportunity to participate in coworking and other asset classes that are 
generally unavailable to most investors 
- Ability to obtain superior returns due to the Fund’s negotiating power 
- Securing preferred repayment of capital out of a project 
 
 
 
37. Is there any difference between investing in the Initial Closing vis-a-vis any 
of the later closings? 
Investors who enter the Fund after the first closing will have to pay an 
equalization premium as decided by the Investment Manager to ensure a fair 
return to earlier investors. 
*For further information kindly refer to the Contribution Agreement. 
 
38. What kind of reports are provided to the investor?  
The Fund provides detailed periodic reports as per SEBI guidelines for 
alternative investment funds. In addition, investors will be able to log into 
SmartOwner’s client control panel and access additional documents and 
information relevant to their transaction, such as payment receipts, distribution 
statements, periodic project updates with photographs, valuation reports 
prepared by independent third parties, information relating to the Fund’s 
performance, income, financials and assets, and other information and reports 
of interest to investors. 
  
39. How often do investors receive a valuation of their investment?  
The valuation of the Portfolio Investments will be made by an independent 
valuer on a half-yearly basis or other such period under the AIF Regulations, 
and the same shall be provided to the Contributors. 
 
G. FAQs for NRI Investors 
 
40. Can NRIs and PIOs invest in SmartOwner Capital Growth Fund 1? 
Yes. 
 
41. From which account can NRI/PIOs invest? 
Investments for the units of AIF acquired by a person resident outside India 
shall be made by an inward remittance through the normal banking channel 
including by debit to any NRE / NRO account. 
 
42. If at the time of investment the NRI had invested through his NRE/NRO 
account and thereafter his status as non-resident changes, then how would 
the drawdowns take place? Would it need to necessarily continue from the 
account where the initial investments were made? 
In such cases the investor needs to inform the Fund about the change and 
provide necessary supporting documents so that the information can be 
updated. Thereafter, the Fund will accept drawdowns from the bank account 

 
 that investor maintains at the time. 
 
43. Which address should be included in the application form? 
Communication address can be any address preferred by the investor, Indian or 
foreign; the permanent address of an NRI should be an overseas address. 
 
44. To which account will payouts – remittance of distribution and capital from 
the fund be made for NRI contributors? 
The payouts from the Fund are made to the same account from which the 
contribution of the NRI investor was received. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Disclaimer –The information contained in the above document is not a complete presentation of every 
material fact regarding or relating to the Fund and is neither an offer of units nor an invitation to invest. 
The information provided herein is for general reference on a best effort basis and does not constitute 
any legal, tax or investment advice. These FAQs provide general guidance to the investor and do not 
constitute any tax advice. Investors should consult their own tax, financial and legal advisors prior to 
investing and at the time of tax reporting. This communication is meant for use by the recipient and not 
for circulation/reproduction without prior approval.