Kotak Realty has closed its latest fund with $400m (€292m) raised for investment in India’s residential sector.

Kotak chief executive Srini Sriniwasan told IP Real Estate that the fund is backed by international investors, including sovereign wealth funds from the Middle East.

Sriniwasan said: “The fund is now investing and putting capital to use in India’s top five cities.”

The seven-year fund, with a two-year extension, is targeting returns of around 22% from properties in Bangalore, Chennai, New Delhi, Hyderabad and Mumbai.

India’s residential sector has recently attracted the likes of Dutch pension investor APG and Canada Pension Plan Investment Board (CPPIB).

Kotak is, Sriniwasan added, also talking to international investors with a view to raising up to $500m for a new credit markets fund targeting debt, including real estate loans.

“The Indian market needs a bit of a clean-up following excess borrowing and we are targeting that,” Sriniwasan said.