HDFC courts sovereign funds for fourth property vehicle
HDFC Realty, the private equity arm of India’s Housing and Development Finance Corporation, is in talks with Government of Singapore Investment Corp. (GIC), Temasek Holdings, Abu Dhabi Investment Authority (ADIA) and Kuwait Investment Authority (KIA) over potential LP commitments to its latest offshore fund.
HDFC Venture Capital is looking to raise $400-600 million for what will be its fourth vehicle and will formally begin marketing by the end of November, The Business Standard reported. Media coverage in early October linked the company to a $600 million raise.
HDFC VC already manages one offshore vehicle, HDFC International Real Estate Fund (HIREF International), which closed at $800 million in 2007. There are local currency vehicles, HDFC India Real Estate Fund and HDFC IT Corridor Fund, worth INR10 billion ($202 million) and 4.64 billion, respectively. HIREF International is said to have invested in 17 projects and exited one of them so far.
Rising interest rates and tighter bank lending has hit consumer demand for property and also pushed developers toward other sources of funding, notably private equity. According to property consultancy Knight Frank, PE 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.
According to Venture Intelligence, private equity investment into real estate accounted for 14 investments in the quarter ending September 2011, raking in $388 million across the eight deals with disclosed values. This was also down on the activity seen in the third quarter of 2010, in which PE invested in 21 targets, committing investing $744 million across 20 deals with disclosed values.
ICICI Venture is reportedly in the process of raising its Advantage Fund Real Estate Series 2 fund, with a target of INR10 billion. Kotak Investment closed its fourth property fund at INR4.5 billion in July. According to AVCJ Research, other funds in the market include ASK Property Investment Advisors' ASK Real Estate Special Opportunities Portfolio II fund, which is seeking INR5.2 billion.
This week the head of Morgan Stanley's India real estate operations confirmed he was leaving to launch an independent vehicle.
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