HDFC Property Fund to raise $500 million overseas

HDFC Property Fund, backed by housing finance major HDFC, is looking to raise a $500 million (Rs 3,200 crore) offshore real estate fund in the next two-to-three months, said an executive in the know.

This is HDFC Property Fund's third offshore fund, which will have a fund life of nine to 10 years compared to seven years in the previous funds, said the executive. He added many projects take longer periods to complete and, hence, the new fund would have longer fund life.

The executive added the fund manager would invest in equities apart from doing structured debt deals.

FUND-RAISING HISTORY

• June 2005: HIREF domestic fund raises Rs 1,000 crore
• July 2005: Rental yield fund raises Rs 464 crore*
• August 2007: HIREF International raises $800 million
• March 2015: Offshore fund raises $375 million

*Domestic fund; HIREF stands for HDFC India Real Estate Fund

"NCDs (non convertible debentures) carry coupon rates of 19-20 per cent but in equity, a fund can make 25-26 per cent returns," he said.

The fund manager raised $125 million in March this year for its second offshore fund, which took the total corpus of the fund to $375 million.

Although the fund manager wanted to raise a sum of $500 million, it closed the fund at $375 million as the "balance money was taking time and investors wanted it to invest the funds first and come back to the market," said the executive who did not want to be named.

The $375 million it raised was collected from investors such as Singapore's wealth fund GIC, State General Reserve Fund of Oman, and a clutch of investors in West Asia and other countries.

Even Piramal Fund Management's plan to close a $150-million offshore fund by April was delayed as limited partners' investments became slow. After the initial close of $50 million last year, Piramal is looking to raise another $50 million this month.

"The fund raising was relatively positive. Global investors are again upbeat about Indian properties," said the executive quoted above.

From the money raised, HDFC Property Fund has already deployed Rs 1,400 crore and is looking to use the rest in the couple of months, the executive added.

The fund manager did a Rs 180-crore transaction with Paranjape Group in Pune, a Rs 200-crore deal with the Mahagun Group in Delhi, Rs 130 crore with True Value Homes in Chennai, and a Rs 175-crore transaction with Bengaluru-based Embassy Group, among others.

Piramal Fund Management, part of the Ajay Piramal-owned Piramal Group, is in early talks with sovereign and pension funds to raise a $300-350 million (up to Rs 2,240 crore) offshore fund on the private equity platform.

Another Mumbai-based fund manager, ASK group, is in the market to raise a Rs 1,500-crore domestic fund as well as a $200-million offshore fund.

Private equity investments in India's real estate companies rose 85 per cent to Rs 5,168 crore in the January-March period from Rs 2,800 crore a year ago, according to a report of global property consultancy Cushman and Wakefield.