HDFC Capital Advisors, an arm of mortgage leader HDFC, has closed its second affordable housing fund, creating a USD 1-billion corpus, the lion’s share of which is flowing in from the Abu Dhabi Investment Authority. With the latest round of funding commitment from the Abu Dhabi sovereign fund and those from HDFC which is the sponsor, the fund has raised USD 550 million as the corpus. Called HDFC Capital Affordable Real Estate Fund-2, it will be combined with the first fund raised in 2016, together creating a USD 1-billion corpus, targeted at affordable and mid-income residential projects in the top 15 cities, HDFC said in a statement on December 21, 2017.
The new funds will have a development footprint of 75 million sq ft, across affordable and mid-income residential projects in the leading 15 cities over the next two-three years, it added. The main objective of this fund, headed by Vipul Roongta, chief executive of HDFC Capital Advisors, is to provide long-term equity or mezzanine capital to marquee developers at the land and pre-approval stage, to develop affordable and mid-income housing.
Earlier this week, HDFC had said it would raise up to Rs 13,000 crores, by selling almost five per cent to investors. This would be the first equity raising by the company in a decade. The company had also said it was open to inorganic growth in the affordable housing segment and that a portion of the money to be raised, would be set aside for this.
The funds align with the government’s goal of increasing the overall housing supply, including the Housing for All by 2022 initiative, HDFC said, adding ‘the primary investor in both the funds, is a wholly-owned subsidiary of the Abu Dhabi Investment Authority’. HDFC will be the sponsor and HDFC Capital Advisors will be the investment manager for the second fund. Investor and sponsor fund have committed USD 550 million so far.
Commenting on the financial commitment for the funds, HDFC chairman Deepak Parekh, said “These funds will play a significant role, in achieving the ‘Housing for All by 2022’ objective. Affordable housing will not only act as a growth driver for the real estate industry, but will also be a catalyst for overall growth. Since lack of flexible, long-term capital, is one of the key challenges facing developers, our funds will focus on providing access to financing at attractive rates and on flexible terms.”
Terming the Indian housing market as presenting a compelling investment opportunity, Khadem Al Remeithi, executive director, real estate and infrastructure department, at the Abu Dhabi sovereign fund, said, “Our investment aims to meet strong demand for early-stage financing of housing projects and encourage continued growth of the affordable and mid-income residential sector.” HDFC chief executive Keki Mistry said affordable housing is a critical component of quality urban infrastructure, as also a growth-driver for the real estate industry. “These two funds will look to partner with developers, to form long-term platforms focusing on affordable and mid-income housing,” Mistry said.
HDFC managing director Renu Sud Karnad said the funds will help address the demand-supply gap in affordable housing, apart from ensuring flexible financing to quality developers. HDFC Capital Advisors gives investment advisory to real estate private equity financing and is the investment manager to these two funds. Created in 1976, the Abu Dhabi Investment Authority has been focusing on long-term value creation and manages a diversified global investment portfolio, across over two dozen asset classes.