By Nitya Pandit
Through the joint venture between Housing Development Finance Corporation (HDFC) and Abu Dhabi Investment Authority (ADIA), $500 million will be invested to affordable, mid-income housing projects in India, in March 2018. The funds raised by the subsidiary of HDFC (namely HDFC Capital Advisors Ltd.), will be used as the investments. This joint venture will make it possible for leading developers to easily finance at attractive rates and using flexible terms.
Details of the investment
Through this joint venture platform, about 25,000 homes of 300-800 sq. ft. carpet area will be built. The key developers will be Godrej Properties, Mahindra Lifespace Developers, Signature Global, Radius Developers, Rustomjee Group and Acme Group, and they will be focusing on the cities of Mumbai, Bengaluru, Gurgaon, Kolkata, Chandigarh, and Rajasthan. Besides investing in these projects, HDFC Capital will also lend its support for product configuration, construction efficiency, design, branding and sales process; hence increasing efficiency in a sector that hasn’t been the most attractive for the developers in the past. Creating the largest fundraising for affordable, mid-income housing in the country, HDFC Capital raised $550 million under the closing of its HDFC Capital Affordable Real Estate Fund- 2 (H-CARE-2) – its second affordable housing fund. This fund, in combination with H-CARE-1, has raised more than a billion dollars for residential projects in top 15 Indian cities.
Primary objective and aim
According to HDFC Capital Advisors chief executive Vipul Roongta, the key objective here is to ensure long-term equity and mezzanine capital to marquee developers at the land and pre-approval stage to enable their entry into affordable housing. The HDFC-ADIA venture has come at the right time, with affordable housing becoming a sunrise segment currently as well as for the future, considering the shortage of housing. Also, the government’s help in the form of ‘Housing for all by 2022’ will be a driver of growth in India’s real estate market and increase the growth by GDP. Also, H-CARE 1 and H-Care 2 will potentially partner with developers to focus on affordable, mid-income housing.
Affordable housing market
Affordable housing, as a concept, possesses a high growth and earning potential. However, the efficiency of the housing finance players’ business model while scaling up is yet to be tested. While affordable housing has remained a dream for the past decade or so, the previous government was unable to do much to make this dream a reality. A few reasons behind this were inadequate infrastructure, an extremely long approval process, and affordable acquisition of land in urban areas.
Even with the help of the current government, affordable housing remains a distant dream. More and more youth from villages move to the outskirts of cities; most migrate with fewer jobs in hand and a greater hope to find work. Creating a need for housing, these migrants should look for jobs in the construction industry, an obvious avenue.
Featured Image Source: Pexels
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