HDFC Property Fund raises $250 mn via offshore fund

Bangalore/Mumbai: HDFC Property Fund, the private equity arm of Housing Development Finance Corp. Ltd, has raised $250 million (around Rs.1,500 crore today) through an offshore fund. It hopes to raise another $150 million by the end of the year, said a person directly familiar with the development who did not want to be named.

On Friday, HDFC Property Fund informed the BSE that it had raised the capital through its second international fund, saying “the recently closed fund will focus on investing primarily in residential property developments in major cities across India”.

The cumulative assets under management now exceed $1 billion, the statement added.

The new fund, which started raising capital in 2012, had targeted a corpus of $500 million. But it has raised only $250 million so far, and decided to do a first close and start the process of investing before attempting to raise another $150 million, said the person cited earlier.

The new fund, which started raising capital in 2012, had targeted a corpus of $500 million. But it has raised only $250 million so far, and decided to do a first close and start the process of investing before attempting to raise another $150 million, said the person cited earlier.

Typically, funds that aim to raise a large corpus raise a certain amount of capital and announce a first close, after which they start investing in deals.

HDFC Property Fund had last raised $800 million through Hiref International Llc, an offshore fund, in 2007.

Its new offshore fund will start investing the capital it has raised and will invest a maximum of Rs.240 crore in each transaction. It will invest in Bangalore, Kolkata, Delhi-National Capital Region (NCR), Pune and Mumbai.

The fund will invest in residential projects and is expecting an internal rate of returns (IRR) of 23-24%.

“We will do structured investment with a portion of equity in these investments,” the person said.

Of the $250 million, the fund has already committed Rs.800 crore across a few deals in Mumbai, Pune and Bangalore.

One of these is the Vrindavan Tech Village project in Bangalore, which is being developed by realty firm Embassy Property Developments Pvt. Ltd and where Blackstone Group Lp is an investor.

HDFC Property Fund will invest around Rs.240 crore in the 30-acre residential component of the project, said a second person familiar with the transaction.

HDFC has raised the offshore fund in difficult capital-raising conditions when global investors are wary of putting their money in the Indian real estate market.

Funds raising offshore capital are, in fact, finding it far more challenging compared with domestic capital, which is still easy to come by.

Financial services firm ASK Group, which plans to raise a $200 million real estate offshore fund, has raised $50 million from global investors on its own and has hired Cushman and Wakefield as a placement agent to help raise the remaining $150 million.

“This (HDFC) fund raise is a sign that foreign investors are back looking at India and they are ready to give capital to Indian funds. The expectations from the government is very high and investors are starting to re-invest in India,” said Ambar Maheshwari, managing director-corporate finance, at property advisory Jones Lang LaSalle India.