Shapoorji eyes tie-up with IFC, HDFC Capital Advisors for low-cost housing

Plans to build homes in the Rs 10 lakh to Rs 20 lakh category on the peripheries of large and tier II cities

Shapoorji Pallonji Real Estate is in talks with HDFC Capital Advisors, the real estate fund management arm of HDFC, and International Finance Corporation (IFC) separately, to float a platform to invest and develop low-cost homes across the country, sources in the know said.

They plan to build homes in the Rs 10 lakh to Rs 20 lakh category on the peripheries of large and tier II cities, such as Jaipur and Indore, among others.

For HDFC Capital and Shapoorji, low-cost housing is a new segment which has low margins but scale makes up for the small margins. Mails sent to Shapoorji Pallonji, HDFC and IFC did not elicit any response.

Sources said a huge opportunity in the segment and lack of serious players have attracted Shapoorji and HDFC Capital. “For IFC, it fits wells with its impact investments agenda. It is keen on smaller cities,” sources said.

Though Tata Sons-owned Tata Housing pioneered the concept of ‘low-cost housing’, it is shifting to mid-income housing in the Rs 40 lakh plus pricing segment, in cities with employment potential.

Currently, only a handful of developers, such as VBHC, are doing low-cost housing on a pan-Indian level.

Anuj Puri, chairman of Anarock Property Consultants, said unavailability of land at cheaper rates within the municipal limits in a city is among the major challenges for most builders. “Despite being accorded infrastructure status, builders are unable to get funding from major banks and non-banking financial companies (NBFCs) at lower interest rates. So, the profit margins for these projects are much lower for developers in this segment. Also, lower consumer demand in the peripheries where most low-cost housing is currently coming up is also preventing the few private companies to take it up,” Puri said.

Shapoorji Pallonji already has a mid-income housing joint venture named Joyville with investors such as Actis, Asian Development Bank (ADB) and IFC, which is building homes in the bracket of Rs 40 lakh to Rs 60 lakh in Virar near Mumbai and Gurugram and Rs 25 lakh to Rs 40 lakh in Kolkata. 

HDFC Capital, which has raised over $ 1billion in two affordable housing funds (H Care-1 and HCare-2) from the likes of Abu Dhabi Investment Authority (ADIA) and others, has floated a handful of investment platforms for mid-income housing projects. 

It has floated platforms with Prestige Estates, ATS Homecraft, Mahindra Lifespaces, Arvind Smartspaces and so on.

HDFC Capital is also floating a third affordable housing fund and is in talks with ADIA and others, sources said.

Shapoorji Pallonji Real Estate is developing projects in Mumbai, Thane and Bengaluru. It is also launching a private equity fund of $ 1.2 billion to invest in warehousing projects in the country.

IFC has been increasing its bets in housing and housing finance companies.

In April, IFC proposed to invest up to $150 million in Piramal Capital & Housing Finance.

IFC recently said it will invest around $30 million in Signature Global’s upcoming project which is expected to cost $100 million.

What they have done so far

• Shapoorji Pallonji already has a mid-income housing joint venture named Joyville 
• HDFC Capital has raised over $1billion in two affordable housing funds
• It has platforms with Prestige, ATS Homecraft, Mahindra Lifespaces, Arvind Smartspaces
• Shapoorji Pallonji Real Estate is developing projects in Mumbai, Thane and Bengaluru 
• The firm is also launching a private equity fund of $1.2 billion to invest in warehousing projects
• IFC in April this year proposed to invest up to $150 million in Piramal Capital & Housing Finance

Source: Reports, companies