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HDFC rolls out its $1-billion offshore fund for India’s affordable housing dream

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India needs close to 7 million houses every year; and almost 75% of this demand is from the affordable homes segment. And now the country’s leading mortgage lender HDFC has launched its $1-billion offshore fund to finance such projects, giving more wings to India’s affordable housing story.

Two persons close to the development told The Economic Times that the world’s second largest sovereign wealth fund the Abu Dhabi Investment Authority (ADIA) is one of the investors. Besides, two European pension fund pools have also committed investments. The pool will invest in affordable housing projects across India.

An industry source told the financial daily, “There’s shortage of equity capital in the affordable housing space. This fund will solve that problem as it is being presented to potential investors as an equity fund with a 12-year investment horizon.” The fund will follow RBI mandate while selecting affordable housing projects.

Anuj Puri, chairman & country head, JLL India, a property consultant, told ET, “There’s a lot of demand from strategic investors in affordable projects, but there are not many investible options. Affordable housing, especially at the outskirts of towns and metros, becomes difficult for the developer because of high land pricing. Land has to be priced appropriately for any affordable housing project to succeed.”

Puri further added, “Apart from partnering with builders, HDFC will have to buy land parcels away from the city to be profitable. If they manage a proper cost structure, the fund will be able to yield 20-25% returns.”
(Image: The Times of India).

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