IIFL arm to raise $500 million for maiden offshore affordable housing fund

IIFL, which has mostly tapped domestic investors for its real estate funds, decided to go offshore as well in the last couple of months. Its real estate investment business has raised Rs6,000 crore since late 2011. Photo: Aniruddha Chowdhury/Mint

Mumbai: IIFL Asset Management Ltd will begin raising its first offshore affordable housing fund of up to $500 million in the next financial year, a top company official said, even as it continues to raise a similar $500 million fund mostly from domestic investors.

IIFL Asset Management, an arm of IIFL Investment Managers, expects to close its domestic fund by the end of the financial year.

“We are planning to raise another $400-500 million fund post-March after we close the domestic one,” Balaji Raghavan, chief investment officer (real estate investments) at IIFL Asset Management said. “The second fund will be raised mostly from offshore investors and will be focused on affordable housing segment like the current one, which we are in the process of raising. We have already starting talking to institutional investors for the second fund,” Raghavan added.

“It has been six weeks since we launched the (domestic) fund and have raised a little over Rs1,000 crore from the investors including the commitment from our sponsor. We have crossed the half-mark,” Raghavan said, adding that for the first fund, about 95% of the money will be raised from domestic investors.

The fund has received a $25 million commitment from Fairfax Group of Canada as well. Fairfax owns a little over 35% in IIFL Holdings Ltd, the parent company.

IIFL, which has mostly tapped domestic investors for its real estate funds, decided to go offshore as well in the last couple of months. Its real estate investment business has raised Rs6,000 crore since late 2011.

IIFL Asset Management’s affordable housing fund comes at a time when banks, housing finance companies and alternate investment funds are drawn to the ‘Housing for All’ mission. According to a presentation by real estate consultancy Knight Frank dated 24 November, India has a shortage of 18 million housing units.

In December 2017, HDFC Capital Advisors Ltd, a real estate investment advisory arm of mortgage lender Housing Development Finance Corp. Ltd, had announced that it has raised $550 million for its affordable housing fund, which will invest in affordable and mid-income residential projects in 15 cities across India. Last week, the State Bank of India board also approved Rs20,000 crore fund-raising through long-term bonds for financing affordable housing and other infrastructure projects.

Commenting on the investment strategy for both funds, Raghavan said while the firm has always been focused on the mid-market segment, the new funds will sharpen its focus in the affordable category.

“We will be further lowering the ticket size and look at investment opportunities in the Rs20-25 lakh segment. In terms of deal structure, we will be more benign with the repayment terms, taking into account the cash flows of the developers, without compromising on the returns,” said Raghavan, adding the firm will now look for investment opportunities in tier-2 cities like Lucknow and Jaipur, apart from the metros.