HDFC's realty venture to mobilise $750 million

The exuberant real estate market would see Housing Development Finance Corporation's (HDFC) real estate venture capital arm launching a new fund for international investors.

HDFC Venture Capital is launching a $750 million fund on a private placement basis for international investors, HDFC said in its 2005-06 annual report.

The launch comes amid concerns that real estate prices in India have reached unhealthy levels. HDFC chairman Deepak Parekh has cautioned that real estate is fast becoming a speculative commodity, which is an unhealthy trend and has led to unaffordable price levels in many cities.

At least a quarter of the demand for real estate is being driven by speculation, while in some pockets of the country as high as three-fourths of the sales are effected by pure investors, he said.

HDFC Venture began operations in early 2005-06 and has total funds under management of Rs 1,464 crore. About 71 per cent of the Rs 1,000 crore HDFC Property Fund has been invested in unlisted equity and equity-linked instruments of companies engaged in real estate activities such as large mixed developments, IT parks, residential projects and commercial offices.

The second domestic scheme, HDFC IT Corridor Fund has a corpus of Rs 464 crore. The entire corpus has been invested in rental incomeyielding commercial properties in major cities in India. During 2005-06, HDFC Venture made a net profit of Rs 9.08 crore. HDFC owns 80.5 per cent of HDFC Venture.