India's LIC Housing Finance to raise $96m fund
LIC Housing Finance, the mortgage lender owned by Life Insurance Corp. of India, plans to enter the private equity market with an INR5 billion ($96.5 million) urban development fund. Half of its corpus will go toward equity and equity-related investments in companies developing industrial and IT parks, and special economic zones, with the remainder committed to mid-income affordable housing.
The fund, which will be managed by LIC Housing Finance's asset management unit, is expected to reach a close in 8-9 months, Reuters reported. As much as INR2 billion has been raised already, with LIC Housing Finance and Life Insurance Corp. of India each putting in INR500 million. Further capital is likely to come from local institutional investors and high-net-worth individuals.
A.K. Sharma, CEO of the asset management unit, noted that the need for equity financing to support projects has led to greater private equity participation in the market. He added that the new fund will only invest in projects at a late stage of development and not directly in projects. The target IRR is 12%.
Another of India's leading mortgage lenders, HDFC, is already an active player in private equity. In November, HDFC Realty was said to be in talks with several sovereign wealth funds over potential LP commitments to its latest offshore fund, which is targeting $400-600 million. HDFC has another offshore vehicle currently in operation as well as several local currency funds.
Affordable housing - for which there is clear demand in India - has also proved attractive to private equity. In August, The Carlyle Group committed $26 million to Value & Budget Housing Corporation (VBHC), which wants to build one million affordable entry-level homes nationwide in the space of a decade. Earlier, Warburg Pincus formed a joint venture with Lemon Tree Hotels that is expected to develop affordable housing projects.
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