HDFC Capital in $1.22-billion deal for affordable housing fund

HDFC, Abu Dhabi Investment Authority commit $1.22 bn

HDFC Capital on Sunday announced that its third fund — HDFC Capital Affordable Real Estate Fund-3 (H-CARE-3) — received a commitment of $1.22 billion from sponsor Housing Development Finance Corporation (HDFC) and Abu Dhabi Investment Authority (ADIA).

In technical parlance, this is an initial close, indicating room for further flow of money into the corpus. Returns from the investments are to be ploughed back into the fund having a life between 12 and 14 years.

Thus, combined with potential reinvestments, the total corpus increases to an estimated $1.88 billion in funds focused on the affordable housing segment.

Meanwhile, HDFC Capital is in talks with four-five prospective investors to infuse more into the corpus. It is expected to complete the fund-raising process within the first half of calendar year 2022, banking sources said. 

Deepak Parekh, chairman, HDFC, said, with support from marquee global investors like ADIA and partnerships with leading developers, the platform is well on its way in ensuring that many more Indians become homeowners.

Set up in 2016, HDFC Capital, a wholly-owned subsidiary of HDFC, is aligned with the Centre’s goal to increase housing supply and support the Pradhan Mantri Awas Yojana — ‘Housing for All’ initiative.

HDFC is the sponsor of the fund and ADIA the primary investor.

H-CARE 3 combines HDFC Capital’s Affordable Real Estate Funds – 1 & 2, raised in 2016 and 2017, respectively, to create a $3 billion funding platform.

The primary focus of the fund is on providing long-term, flexible debt across the life cycle of real estate projects (including land, approval and last-mile funding) for affordable and mid-income housing across India.

The H-CARE 3 fund is expected to be committed towards investments over the next four-five years. The fund has flexibility to provide equity funding for real estate projects. It will invest in tech companies like construction technology, fin-tech and clean-tech that address the needs of the affordable housing ecosystem.

Khadem AlRemeithi, executive director of the real estate & infrastructure department, ADIA, said, H-CARE 3 presents the opportunity to grow ADIA’s existing relationship with HDFC.

This builds on the success of previous H-CARE funds, which have supported the development of new mid-market housing projects across the country.

ADIA has been a key investor in two funds managed by HDFC Capital.

The projected development footprint is estimated to be 280 million square feet. This is across affordable and mid-income residential projects in leading cities of the country.