Mumbai-based ArthVeda Fund Management Pvt Ltd (AVFM), on February 6, 2017, announced that Qatar Holding (QH) has committed to invest USD 250 million in its affordable low and middle income (LMI) fund, which projects an IRR in excess of 18%-21%. In a statement, Bikram Sen, CEO of ArthVeda said that the subscription of the entire corpus of its FDI-compliant affordable housing fund by Qatar Holding, was the first substantial foreign inward investment into India’s affordable housing segment spanning LMI residences, immediately after India’s union budget on Feb 1, 2017.
See also: Budget 2017: Infrastructure status to give a big boost to affordable housing
The sweet spot of LMI residential real estate in India offers a significant opportunity to grow investments and AVFM will continue to build on this success by conceiving more of such vehicles, the company said, in a release.
According to ArthVeda, it is estimated that India needs to build 19 million urban housing units in the low and mid-income category by 2022, across tier 1, 2 and 3 cities, which requires a capital of USD 1 trillion.
“AVFM’s Affordable Housing Fund leverages our entire group’s leadership in the LMI lending segment and applies that to investments in affordable housing. I am very proud that a prestigious institution from Qatar has invested in this fund through ArthVeda,” said Kapil Wadhawan, chairman and managing director of DHFL and ArthVeda. Investments into the AVFM fund were raised in collaboration with the Dubai-based CI Holding Global, founded and run by Omar Farooqui. AVFM is part of Wadhawan Global Capital, a financial services conglomerate, with Dewan Housing Finance Corp Ltd (DHFL) as the flagship entity. DHFL along with its associate housing finance company, Aadhar Housing Finance, lends on an average USD 350 million in a month, to home buyers at more than 500 locations in India.
According to AVFM, the great push by India to make affordable housing a centerpiece of the country’s growth agenda, will trigger more foreign investments into this sector. The positive FDI policy changes that have happened in this segment, will also continue to give a boost to inward investments. The government of India has gradually removed minimum project and investment ticket size restrictions in this segment, which should significantly catalyse development and investment.
There is huge emerging and latent demand for affordable housing in the LMI segment and the quick absorption rate, low cyclicity and low average investment ticket size, make it a very attractive investment proposition, according to AVFM.
Apart from the Affordable Housing Fund, which is AVFM’s first offshore fund raising, the company also has domestic real estate funds. AVFM’s domestic USD 17 million Dream Fund, which it exited in 2015 gave a gross IRR of 17% (net to investors). A mid-income USD 22 million domestic Star Fund I, which is due to achieve exits from all its investments in the next couple of months, will give equally high returns. A domestic low-income housing fund, Asha, is currently in deployment phase.
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