The Housing Development Finance Corporation got long-term institutional investors to commit $800 mn to its first sponsored international real-estate fund.
28 long-term foreign investors pitch in
MUMBAI: The Housing Development Finance Corporation on Thursday got long-term institutional investors to commit $800 million (Rs 3,300 crore) to its first sponsored international real-estate fund.
The corpus that the Mauritius-registered HIREF International LLC garnered included $50 million from HDFC itself.
Renu Sud Karnad, chairperson of HDFC Property Ventures Ltd, and executive director, HDFC, said the objective of the fund is to invest in foreign direct investment (FDI)-compliant real estate projects in India to achieve long-term capital appreciation.
"The fund will target equity returns of 20%-25%," she said.
This is HDFC's second fund. The first one launched two years ago has a corpus of Rs 1,400 crore. Taken together, HDFC thus becomes India's largest international real estate funds principal.
It already has a domestic fund which has invested in excess of Rs 1,000 crore in the Indian realty sector.
The 9-year closed-end fund, which was open to subscription from only foreign investors, was privately placed. In all, there were 28 investors.
"We're not in a hurry to deploy the money," says Karnad. "We are looking at IT parks, education complexes and healthcare sectors for investing the fund."
The fund will invest in hospitality, residential and education complexes," she added.
India's housing finance pioneer hopes to capitalise on its experience in the sector.
KG Krishnamurthy, managing director, HDFC Property Ventures, said even today it is a relationship game. "We have relationships with 350 developers across the country."
Sources in the know said HDFC's first domestic realty fund is fully invested across 19 projects.
It has a valuation that reflects an 80% return, but the final returns can be calculated only after its 7-year tenure ended.
HDFC manages the fund and gets an annual fee of 1.75% and can earn a 20% bonus provided it manages to give a return above 10%.
HDFC said through strong industry relationships in the Indian real estate market, the fund expects to have a competitive advantage over similar funds and generate enhanced returns for investors.
In addition, the returns that numerous investments have generated in recent years have caught the attention of the investor community.
Karnad said the fund will have a conservative approach with no regional or sector bias and would invest in residential, commercial, hospitality, education, healthcare sectors and developers' entity level."
HDFC said that the growth in investor interest is driven by strong economic growth, a reasonably stable currency and healthy foreign exchange reserves.
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