HDFC Capital bets on low-cost housing, emerges the largest investor

Emerges the largest investor among home-grown funds

HDFC Capital, the real estate private equity arm of HDFC, has emerged the most prolific investor among home-grown property funds during the Covid-19 pandemic.

The fund management company, helmed by Vipul Roongta, invested Rs 1,731 crore in 2020 and Rs 1,545 crore in 2021, the data on its investments showed. Its key investments in 2020 include Rs 850 crore in Mumbai-based Runwal group, Rs 400 crore in New Delhi-based ATS group, and Rs 296 crore in Eldeco.

In 2021, it invested Rs 500 crore in Arvind Smartspaces, Rs 400 crore in Signature Global, and Rs 350 crore in Pune-based Kumar group, among others. The investor has made exits worth Rs 2,175 crore since FY21, the highest among home-grown real estate funds in the market. Its key exits include: Rs 600 crore from Prestige Estates, and Rs 375 crore from Runwal and Signature Global each.

An email sent to HDFC on the subject did not elicit any response.

In comparison, active property investors such as Motilal Oswal Real Estate did 31 investments worth Rs 1,580 crore while it did 10 exits worth Rs 890 crore in the past 24 months.

ASK Property Investment Advisors, part of ASK Group, invested Rs 540 crore in FY21 and Rs 220 crore in FY22. They did exits worth Rs 525 crore in FY21 and Rs 33 crore in FY22.

Shobhit Agarwal, managing director and chief executive, Anarock Capital, said: “The success of HDFC Capital is due equally to the inherent strengths of brand HDFC and Vipul Roongta. More than many other names, HDFC has supported realty companies. They maintain their exposure even when others withdraw. HDFC is one of the major success stories with a consistent ability to raise money, deploy, and exit. And it remains committed to the residential asset class.”

HDFC Capital has a deep understanding of a simple thesis covering residential, mid-market, and top cities, Agarwal said, adding, “they take good credit calls and well-studied market risks. They also help developers and actively guide them the entire way”.

Pradeep Agarwal, chairman of affordable housing developer Signature Global, said: “HDFC Capital saw opportunities during the pandemic and pursued them well. It believed in existing investee companies and worked with them continuously.”

In 2017, HDFC Capital invested Rs 250 crore in Signature Global.

Big fund raising

Set up in 2016, HDFC Capital is aligned with the Union government’s “Housing for All” initiative. With its three funds — HDFC Capital Affordable Real Estate Fund 1 (HCARE-1), HDFC Capital Affordable Real Estate Fund 2 (HCARE-2), and HDFC Capital Affordable Real Estate Fund 3 (HCARE-3) — has a $3 billion platform for affordable housing.

HCARE-1 and HCARE-2 were raised in 2016 and 2017, respectively.

In January this year, HDFC Capital achieved the initial closure of its third fund of $1.88 billion (about Rs 13,500 crore), focused on affordable housing, and investors such as the Abu Dhabi Investment Authority have been repeat investors, which shows the performance of the fund manager , experts said.

With an investment of $1.1 billion in affordable housing, Knight Frank said HDFC Capital was the largest fund house in the world, ahead of UK-based Actis and CDC group, which invested $322 million and $240 million in this segment, respectively.