HDFC plans global realty fund

Housing Development Finance Corporation (HDFC) plans to launch an international real estate fund to cater to the demand of non-resident Indians (NRIs) and foreign investors in view of the growing interest in the country's real estate sector.

The country's first real estate venture fund "" HDFC India Real Estate Fund - closed today, accumulating a corpus of Rs 1,000 crore.

The fund, launched in association with State Bank of India (SBI), would be invested in equity and equity-linked instruments of companies engaged primarily in real estate projects in major cities in India.

Targeted at high networth individuals (HNIs), the minimum contribution per investor was pegged at Rs 5 crore, with HDFC and SBI contributing Rs 100 crore and Rs 200 crore, respectively.

The Rs 1,000 crore closed ended fund would be managed by HDFC Venture Capital Ltd, in which SBI has a 19.5 per cent holding.

The shareholder agreement was executed today by Keki Mistry, managing director, Renu S Karnad, executive director, HDFC and Ashwini K Sharma, deputy managing director and CFO, SBI.

"HDFC hopes to capitalise on its 27 years of expertise in the real estate sector and on its relationship with estate developers. About 35-45 per cent of the investment will be made in IT and IT-enabled services and about 20-25 per cent in mixed used development," said Karnad.

Real estate development in India is estimated to be in the region of $ 15 billion, and growing at about 30 per cent annually. It has been projected that there is a demand for 66 million square feet of IT space over five years.

The fund has targeted equity returns of 15-16 per cent, with a hurdle rate of 8 per cent. The investment objective of the scheme was to invest predominantly in companies engaged in real estate-linked assets to achieve long-term capital appreciation, the company stated in a press communique. There would be no regional or sector bias.

The funds would be invested in three classes of projects "" those that are complete, those in the development stage and those in the planning stage. Projects will include residential as well as commercial sectors.