Mumbai: The National Investment and Infrastructure Fund (NIIF) of India on Tuesday said it has invested ₹ 660 crore in HDFC Capital Affordable Real Estate–2 (HCARE 2), a fund managed by HDFC Capital Advisors. This marks the second investment for NIIF’s Fund of Funds and will see NIIF join a unit of the Abu Dhabi Investment Authority (ADIA) as an investor in HCARE 2.
“NIIF’s investment in HCARE 2 demonstrates the role that NIIF’s Fund of Funds can play in the infrastructure and associated sectors in India by anchoring and investing with fund managers with strong track records," NIIF said.
HCARE 2 is structured as a Category II Alternative Investment Fund with a corpus of ₹ 4,290 crore. The fund provides mezzanine finance to developers of mid-income and affordable urban housing projects.
“Housing remains a critical need in India and the demand for housing is expected to grow substantially with increased urbanization. This demand, in conjunction with reforms implemented in the sector creates an attractive investment opportunity for disciplined developers and knowledgeable investors. This investment enables investors in the NIIF Fund of Funds to participate in the attractive mid income and affordable housing sector in India," said Sujoy Bose, managing director and chief executive of NIIF.
HDFC Capital Advisors, a unit of Housing Development Finance Corp Ltd, provides investment management services for real estate private equity financing. It advises HDFC Capital Affordable Real Estate Fund 1 (HCARE 1) and HCARE 2.
Collectively, HCARE 1 and HCARE 2 form a $1.1 billion investment platform targeting affordable and mid-income residential projects in 20 big cities in India. The funds provide long term, equity and mezzanine capital to marque developers at the land and pre-approval stage for the development of affordable and mid-income housing in India.
“The current lack of flexible, long-term capital is one of the key challenges facing developers of affordable and mid-income housing in India. This fund will help address the demand-supply gap in affordable housing and will ensure that flexible financing is provided to quality developers," said Deepak Parekh, chairman of Housing Finance Development Corp. Ltd (HDFC).
NIIF’s Fund of Funds had previously invested £120 million (around ₹ 1,163 crore) in Green Growth Equity Fund (GGEF), which will invest in renewable energy and other green businesses. GGEF aims to raise £500 million for the fund, which is managed by EverSource Capital, a joint venture of home-grown private equity firm Everstone Group and Lightsource BP.
The government had set up the NIIF in 2015 as an investment vehicle for funding commercially viable greenfield, brownfield and stalled infrastructure projects. The government is investing 49% and the rest of the corpus is to be raised from third-party investors, such as sovereign wealth funds, insurance and pension funds, endowments.
NIIF’s mandate includes investing in areas such as energy, transportation, housing, water, waste management and other infrastructure-related sectors in India.
In January, NIIF and Dubai-based port operator DP World announced the creation of an investment platform—Hindustan Infralog—to invest in ports, terminals, transportation and logistics businesses in India. The platform will invest up to $3 billion of equity to acquire assets and develop projects in these sectors.