HDFC targets $600m property fund
Housing Development Finance Corp. (HDFC), India’s largest mortgage lender, is looking to raise a $600 million fund from overseas investors. It will be the firm’s property-focused vehicle.
HDFC will kick off its fundraising efforts with an investor road show in Singapore in November, Bloomberg reported, citing a source with direct knowledge of the situation. The fund is expected invest about 40% of its corpus in residential projects on the outskirts of India's largest cities and as much as 30% in commercial developments.
India's central bank has raised interest rates 12 times since March 2010 in a bid to curb inflation. This has hit consumer demand for property and also pushed developers toward other sources of funding, notably private equity. According to Knight Frank, private equity funding to the sector came to INR12 billion ($252 million) in the three months to August and the consultancy expects it to reach INR35 billion by end March 2012.
The combined net debt of India's 11 listed developers rose 15% to INR385 billion in the 12 months through June, according to Mumbai-based Edelweiss Securities. If developers can't reduce debt, a spate of distressed asset sales is expected.
Earlier this week, HDFC reportedly agreed to invest $90 million in a 200-acre information technology park being planned near Bangalore airport through HDFC India Real Estate Fund International, which closed in 2006 with $800 million in capital.
HDFC's previous commercial investments include Manyata Tech Park. The firm is said to have exited its stake in Manyata Promoters, the park's operating company, to Blackstone Group, for INR5.4 billion, having initially invested INR2.09 billion.
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