HDFC Real Estate PE Arms HDFC Capital to Invest $2 Billion in Affordable Housing Ecosystem
The fund, HDFC Capital Affordable Real Estate Fund – 3 (H-CARE-3), is one of the largest funds raised to invest in the residential real estate sector anywhere in the world. The fund achieved its first close with investors who have already committed more than $1.22 billion.
The main investor in the fund is a wholly owned subsidiary of the Abu Dhabi Investment Authority (ADIA). The total corpus of H-CARE-3 will be approximately $2 billion, including potential reinvestments by the fund.
“In India, housing will play an even bigger role as a catalyst for growth with increased demand for affordable and middle-income housing. Combined with India’s growth prospects, I have never been more optimistic about the housing sector than I am today,” said Deepak Parekh, Chairman of HDFC.
According to him, while the demand for affordable and middle-income housing continues to be robust, the lack of flexible long-term capital is one of the major challenges faced by developers of affordable and middle-income housing in India.
HDFC Capital funds focus on providing developers with access to finance on flexible terms and have supported the development of over 78 residential projects and 180,000 homes across India over the past six years.
HDFC Capital, established in 2016, is part of the Indian government’s goal to increase housing supply and support the Pradhan Mantri Awas Yojana – “Housing for All” initiative.
“With this new fund, we are becoming a platform for the entire affordable housing ecosystem by supporting not only real estate projects through equity and mezzanine financing, but also providers and technology companies that contribute to increasing the efficiency of these projects,” Vipul Roongta, MD and CEO, HDFC Capital, told ET. “Our previous two funds invested more than $1.1 billion in 78 affordable and middle-income projects from 25 developers. Although these two funds have a total duration of 12 years, we managed to exit 25% of the investments with solid returns in four years. »
Using these funds, it has formed joint ventures and alliances with established developers including Runwal Group, Rustomjee Group, Shapoorji Pallonji Real Estate, Prestige Group, Arvind Smart Spaces and Ambuja Neotia.
H-CARE 3 partners with affordable real estate funds HDFC Capital – 1 and 2, raised in 2016 and 2017 respectively, to create a $3 billion financing platform, one of the world’s largest private financing platforms focused on the development of affordable housing.
“H-CARE 3 presents an opportunity to grow our existing relationship with HDFC, while continuing to meet the significant demand for affordable housing in India. This builds on the success of previous H-CARE funds, which supported the development of new middle-market housing projects across the country, in line with Indian government priorities,” said Department Executive Director Khadem Al Remeithi. Real Estate and Infrastructure. , ADI.
The fund will provide flexible, long-term financing throughout the lifecycle of affordable and middle-income housing projects, including seed funding. In addition, H-CARE 3 will also invest in technology companies, including construction technology, fintech, cleantech, etc. committed to the affordable housing ecosystem.
The primary focus of the fund will be to provide flexible long-term debt throughout the life cycle of real estate projects, including land, approval and last mile financing for affordable and middle income housing development. across India.
HDFC Capital’s goal is to finance the development of one million affordable housing units in India through a combination of innovative financing, partnerships and technology, while focusing on sustainability.
In order to achieve this goal, the company is in active talks with leading global investors to raise additional funds to invest in affordable housing in India.
HDFC will be the sponsor and HDFC Capital will be the investment manager for H-CARE3, which will have a 12-year tenure with a provision of two extensions of one year each.
The fund will also have the ability to provide equity financing for real estate projects. The fund is expected to be engaged in investments over the next 4-5 years. Its projected development footprint is estimated at 280 million square feet in affordable and middle-income residential projects in major Indian cities.
The need for affordable housing is increasing in the urban sprawls of India and has caught the attention of many developers and financial institutions. More than half of all Indian residential launches in the top eight cities over the past five years have been in the sub-Rs 50 lakh segment.
In recent years, the government has also introduced several affordable housing schemes including interest rate subsidies for disadvantaged and economically disadvantaged sections, additional tax benefits for developers and home buyers and also granted infrastructure status to affordable housing to facilitate the availability of funds.