While the real estate markets in Tier I cities are moving slow, developers as well private equity funds are relooking their business models and increasingly looking at Tier II and Tier III cities which continue to exhibit strong fundamentals. Changing its strategy too, ArthVeda Fund Management, a fund management arm of Dewan Housing Finance Corp is currently raising a Rs. 200-crore domestic fund which will invest primarily in smaller cities, targeting mid-income housing projects. The fund has identified 16 cities likes of Nashik, Vizag, Nagpur, Raipur, Guntur and Ahmedabad. ArthVeda Fund Management which started operations in 2005-06 as DHFL Venture Capital raised its first fund of Rs. 101 crore in 2006-07. The real estate fund which was mainly invested in bigger cities like Mumbai, Bangalore and Chennai, has so far made six exits with IRRs ranging from 20 per cent to 45 per cent. It has provided investment returns of about Rs. 34 crore to investors and also returned capital of Rs. 8 crore so far. Currently, about Rs. 93 crore is still invested in seven projects.