HDFC Capital creates $1 bn war chest for low-cost housing

HDFC Capital on Thursday said it has raised $1 billion to create a real estate fund that would invest in affordable and mid-income housing projects in the top 15 cities of the country.
 
In 2016, HDFC's arm HDFC Capital Advisors had raised $450 million in its first fund for affordable housing and it has now raised $550 million in the second fund, taking the total size to $1 billion, making it one of the biggest fundraising exercises in this segment.
 
HDFC is the sponsor of the fund and Abu Dhabi Investment Authority (ADIA) is a major investor.
 

HDFC Capital Advisors has successfully achieved the initial close of second affordable housing fund 'HDFC Capital Affordable Real Estate Fund 2, HDFC said in a statement.

 
The second fund will be combined with the HDFC Capital Affordable Real Estate Fund1 raised in 2016 to create a $ 1 billion platform targeting affordable and mid-income housing.
 
Commenting on the development, HDFC Chairman Deepak Parekh said: "These funds will play a significant role in progressing towards the 'Housing for All' by 2022 objective of the government".
 
The affordable housing would not only act as a growth driver for the real estate industry in India but will also be a catalyst for GDP growth, he added.

 
Parekh said the current lack of flexible, long-term capital is one of the key challenges facing developers of affordable and mid-income housing in India and added that this fund will focus on providing leading developers access to financing at attractive rates and on flexible terms.
 
When contacted, HDFC Capital Advisors CEO Vipul Roongta said these funds have been raised from ADIA and HDFC.
 
"We have raised $ 550 million in our second fund. In the first fund, we raised $ 450 million. So, now the total fund size is $ 1 billion. This is one of the largest fundraising for affordable and mid-income housing in India," Roongta said.

 
ADIA has invested $ 900 million, while HDFC has put in $ 100 million in form of equity and mezzanine capital, he added.
 
"We have already invested $ 250 million in about 6 projects. The remaining $ 750 million would be deployed over the next two years," Roongta said.
 
The objective of this platform is to provide long-term equity and mezzanine capital to marquee developers at the land and pre-approval stage for the development of affordable and mid-income housing.
 
HDFC will be the sponsor and HDFC Capital Advisors will be the investment manager for the second fund.

 
HDFC Capital Advisors provides investment advisory services for real estate private equity financing.
 
The developers are currently facing the challenge of lack of flexible and long-term capital.
 
HDFC Vice Chairman & CEO Keki Mistry said: "Affordable housing is a critical component of quality urban infrastructure as also a growth driver for the real estate industry in India."
 
Both the funds would look to partner developers to form long term platforms focusing on affordable and mid-income housing, he added.
 
Renu Sud Karnad, MD, HDFC, said: "These funds will help address the demand-supply gap in affordable housing in India."

 
The two platforms would ensure that flexible financing is provided to quality developers to meet their capital requirement, she added.
 
KhademAlRemeithi, Executive Director of the Real Estate & Infrastructure Department, ADIA, said: "India's housing market presents a compelling investment opportunity driven by the country's continued economic growth and backed by supportive government initiatives".