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Abu Dhabi, UAEMonday 25 June 2018

Indian developer HDFC's $1bn fund, backed by Abu Dhabi reaches financial close

The second affordable housing fund raised $550m in initial closure

ADIA says annualsed returns rose in 2017 amid global stock rally. Delores Johnson / The National
ADIA says annualsed returns rose in 2017 amid global stock rally. Delores Johnson / The National

Indian mortgage lender Housing Development Finance Corporation's (HDFC) investment advisory arm has reached financial close on its billion-dollar affordable real estate fund, which has Abu Dhabi Investment Authority (ADIA), the world's second largest sovereign wealth fund as a key backer.

HDFC Capital Advisors said on Thursday that it had raised $550 million in initial closure on its second affordable housing fund, which will be combined with an earlier fund launched in 2016 to create a $1bn investment pool.

The newly-created fund is set to have a development footprint of 75 million square feet across affordable and mid-income residential projects across 15 Indian cities over the period of two to three years, HDFC said in a statement.

"These funds will play a significant role in progressing towards the 'Housing for All by 2022' objective of the government," said Deepak Parekh chairman at HDFC.

"Affordable housing will not only act as a growth driver for the real estate industry in India but will also be a catalyst for GDP growth. The current lack of flexible, long-term capital is one of the key challenges facing developers of affordable and mid income housing in India," he added.

Affordable housing remains an underserved segment within India's lucrative real estate industry. The world's second most populous state is pushing through an ambitious agenda to bridge the housing gap by building 20 million affordable homes in urban areas by 2022 as well another 10 million rural parts of the country by 2018. However, the targets remain far from realised with a mere 300,000 being built so far under the government scheme implemented in 2015.

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"India’s housing market presents a compelling investment opportunity driven by the country’s continued economic growth and backed by supportive government initiatives," said Khadem Al Remeithi, executive director, real estate and infrastructure department at Adia.

"Our investment in HDFC’s platform aims to meet the strong demand for early-stage financing of housing projects and encourage the continued growth of the affordable and mid-income residential sector," he added.

Adia, whose portfolio size remains undisclosed has made significant inroads in the Indian real estate sector this year.

In October, Adia's wholly-owned subsidiary signed a $1 billion investment agreement with a India's National Investment and Infrastructure Fund to invest in energy, transportation and infrastructure-related sectors.

The Abu Dhabi fund has increasingly pivoted towards the east, increasing its portfolio in China and India, from where it expects continued growth.

Adia remains invested in a number of asset classes, including fixed income and equities in India. It was also reported in July to be in talks to buy 49 per cent of the Rajiv Gandhi Hyderabad International Airport, which serves the capital and IT-hub of the eastern Indian states of Andhra Pradesh and Telangana.

"India’s housing market presents a compelling investment opportunity driven by the country’s continued economic growth and backed by supportive government initiatives. Our investment in HDFC’s platform aims to meet the strong demand for early-stage financing of housing projects and encourage the continued growth of the affordable and mid-income residential sector."