Govt nod for $720mn HDFC realty fund

Housing finance leader HDFC's bid to cash in on India's booming real estate got a boost with the government today allowing a global realty fund sponsored by it to invest up to $720 million (Rs 3,240 crore) in the country.

The Mauritius-registered and HDFC-sponsored India Offshore Real Estate Investments has been allowed by the cabinet committee on economic affairs (CCEA) to invest $720 million (Rs 3,240 crore), raised overseas, in units issued by HDFC International Real Estate Fund (IREF).

IREF would, in turn, invest in Indian companies, an official spokesperson said after the CCEA meeting.

The decision comes at a time when foreign and domestic players have been showing great interest in the country's real estate space. Farallon Capital Management, Morgan Stanley, Merrill Lynch and GE Commercial Finance Real Estate have made multi-million dollar investments in the sector in India.

Investment banker Merrill Lynch has projected India's real estate sector to grow from $12 billion in 2005 to $90 billion in 2015.

The CCEA also allowed the HDFC-sponsored fund to raise $30 million (nearly Rs 135 crore) from the domestic market.

International lenders to the fund would comprise banks, financial institutions, multilateral agencies and high networth individuals across Europe, North America and Asia.

The 'Series A' units that India Offshore Real Estate Investments would subscribe to will have a face value of Rs 1,000 each.

The international scheme of the fund would be managed either by HDFC Venture Capital or a different entity from within the HDFC Group.

HDFC Property Fund is a venture capital fund whose investment manager is HDFC Venture Capital and trustee company is HDFC Ventures Trustee Company.

The fund was set up in 2005, and has launched two schemes over the last one year. The first scheme, HDFC India Real Estate Fund, has a corpus of Rs 1,000 crore, and has invested in commercial, residential, hospitality, integrated township and other associated sectors across the country.

The Rs 464 crore HDFC IT Corridor Fund, the second scheme of the fund, has invested in information technology infrastructure assets across major towns in the country.