Ajay Piramal-controlled Piramal Enterprises and CPPIB Credit Investments on Wednesday announced the launch of $500 million (Rs 3,100 crore) realty fund in India.

CPPIB Credit Investments is the wholly-owned subsidiary of Canada Pension Plan Investment Board; while Piramal Enterprises is already well-known for its investments in diverse businesses, including telecommunications giant Vodafone.

Each of the two investors will contribute $250 million to the fund that will provide debt financing to residential real estate projects across India.

Ajay Piramal, chairman of Piramal Enterprises, said it was an opportune time for the creation of an aligned pool of capital. He added that money would be targeted at what he believed to be very compelling financing opportunities in India's real estate sector.

Macquarie Capital MD Nitin Gupta said the launch of the fund showed that foreign investors were keen to invest in India, but selectively.

Commenting on the deal, he said, "Money will come but into selected baskets only and for funds/advisories that have a well-thought of investment structure assuring good and stable returns."

The interest to be charged by the new realty fund would 3-5 per cent higher than the typical interest rate of around 14 per cent being charged by banks. However, the funding comes at a premium over the interest rate charged by the bank. However, experts believe that the interest rate could come down from 18-20 per cent to 16-16.5 per cent depending on the market scenario and the milestones achieved by the developer.