Mumbai: HDFC Capital Advisors Ltd, a real estate investment advisory arm of mortgage lender Housing Development Finance Corp. Ltd (HDFC), on Thursday said it had raised $550 million in an initial closure of its second affordable housing fund—HDFC Capital Affordable Real Estate Fund-2 (H-CARE-2).
H-CARE-2 will be combined with the first affordable housing fund, H-CARE-1, which was raised in 2016, to create a $1 billion platform, HDFC said in statement. The platform will invest in affordable and mid-income residential projects in 15 cities across India.
The combined platform will provide both long-term equity as well as mezzanine capital to developers to build 75 million sq. ft of affordable and mid-income residential projects over the next 2-3 years. The platform will be headed by Vipul Roongta, chief executive of HDFC Capital.
“These funds will play a significant role in progressing towards the ‘Housing for All by 2022’ objective of the government. Affordable housing will not only act as a growth driver for the real estate industry in India but will also be a catalyst for GDP growth," said Deepak Parekh, chairman, HDFC.
Lack of flexible, long-term capital is one of the key challenges facing developers of affordable and mid-income housing in India, he said. “The H-CARE funds will focus on providing leading developers access to financing at attractive rates and on flexible terms," Parekh added.
A large chunk of the funds for the initial closure of H-CARE-2 were committed by Abu Dhabi Investment Authority (ADIA), a sovereign wealth fund owned by the Emirate of Abu Dhabi. ADIA is also the primary investor in H-CARE-1.
“India’s housing market presents a compelling investment opportunity driven by the country’s continued economic growth and backed by supportive government initiatives. Our investment in HDFC’s platforms aims to meet the strong demand for early-stage financing of housing projects and encourage the continued growth of the affordable and mid-income residential sector," said Khadem AlRemeithi, executive director of the real estate and infrastructure department, ADIA. The latest real estate fund raising by HDFC Capital comes at a time when affordable housing has witnessed a spurt in activity after several incentives provided by the government this year, including infrastructure status.
In October, HDFC Capital partnered with Mahindra Lifespace Developers Ltd, the real estate arm of Mahindra Group to jointly invest Rs500 crore over the next three years to develop affordable housing projects across cities. Other investment managers too are raising funds focused on affordable housing.
IIFL Investment Managers, the wealth and asset management business of IIFL Holdings Ltd, plans to raise a real estate debt fund with a target corpus of almost $500 million that will focus on the affordable housing space, Mint reported on 10 November.