Discussions on with GIC, Temasek, ADIA, Kuwait Investment Authority.
HDFC Realty, the private equity arm of Housing Development Finance Corporation, is engaged in talks with the world’s largest sovereign funds to raise its fourth real estate fund.
According to sources, HDFC Venture Capital Ltd (HVCL), fund manager to HDFC Property Fund, will start raising its new offshore fund, with a corpus of $400-600 million, by the end of November.
According to sources in the know, the company has already started discussion with a few of the Singapore government-owned GIC and Temasek Holdings, the Abu Dhabi Investment Authority (ADIA, owned by the government of Abu Dhabi) and Kuwait Investment Authority. ADIA manages more than $600 billion. Temasek, focused primarily in Asia and Singapore, handles $151 bn under various assets. GIC manages assets worth a little over $300 billion.
HDFC entered the private equity business with HDFC Property Fund in 2005. HVCL manages two domestic funds, a Rs 1,000-crore HDFC India Real Estate Fund and a Rs 464-crore IT Corridor Fund. Another offshore fund launched under the HDFC banner was the $800-million HIREF International.
According to Ramesh Nair, managing director–West India, of Jones Lang LaSalle India, the country’s position as the world's largest growing real estate economy will attract more investments. He said, “India's annual demand for commercial office space (40 mn sq ft), retail space (15 mn sq ft) and residential (300 mn sq ft) is much higher than Western countries.”
HDFC’s domestic fund has invested in residential projects such as Pune-based Vascon Forest Country, Khandala-based Signature Bungalows and Chennai-based Metrozone. It has invested in 18 projects, of which 10 exits have been made so far. Of 17 investments made by the offshore fund, HDFC has exited one investment (Mumbai-based Lodha Excelus) so far.
According to database from VCCedge, five real estate private equity firms are on a fundraising mode since 2011. These being Shapoorji Pallonji Real Estate Fund ($500 mn), ASK Real Estate Special Opportunities Fund ($220 mn), Kotak India Realty Fund IV ($130 mn), JM Financial Real Estate Income Fund ($110 mn) and Milestone Domestic Scheme III ($109 mn).
ICICI Venture is also in process of raising a Rs 1,000-crore India Advantage Fund Real Estate Series 2. Indiareit Fund Advisors, part of the Ajay Piramal Group, is also raising funds. After raising Rs 925 crore from domestic investors last year, it plans to launch a rental yield fund this year.
Followed by the financial meltdown in the US and European countries, most Indian PE fund managers focus more on the West Asian and Southeast Asian markets for fundraising. According to experts, a higher number of sovereign funds and their small exposure to Indian markets are reasons behind the new trend.
Nair added, “India is still an untapped market for funds based out of the Middle East. From their earlier strategy of investing in New York or London, they have a diversified portfolio by investing in different parts of the world, including India.” Early this year, Multiples Alternate Asset Management, a PE fund founded by Renuka Ramnath, the former CEO of ICICI Venture, received $70 mn for its offshore fund from the Public Institution for Social Security, a pension fund run by the government of Kuwait.