Days after parent HDFC Ltd initiated the process of merger HDFC Bank, one of the world’s largest sovereign funds Abu Dhabi Investment Authority (ADIA) invested as an equity partner in HDFC’s real estate alternative investment fund management business.
HDFC Ltd has entered into binding agreements to sell 10% of the fully diluted paid-up share capital of HDFC Capital Advisors Ltd (HDFC Capital) to a wholly-owned subsidiary of the Abu Dhabi Investment Authority (ADIA) for approx. Rs 184 crore ($24.1 million), the housing finance company said in a statement on Tuesday.
ADIA is also the primary investor in the alternative investment funds managed by HDFC Capital, which is currently a wholly-owned subsidiary of HDFC Ltd.
Early April, HDFC Bank, India’s largest private sector bank, and its parent HDFC Ltd, the largest private mortgage financier, announced to merge in a $40 billion all-stock deal.
HDFC Capital, set up in 2016, is the investment manager to HDFC Capital Affordable Real Estate Funds 1, 2 and 3. It manages around $3 billion funding platform.
HDFC chairman Deepak Parekh said the funds managed by HDFC Capital have grown to create one of the world’s largest private financing platforms for the development of affordable housing.
“This investment by ADIA will enable HDFC Capital to leverage ADIA’s global expertise and experience to further propel HDFC Capital towards becoming a leading investment platform for global and local investors across multiple strategies and asset classes in the real estate and technology ecosystem,” Parekh said.
HDFC Capital’s target is to finance the development of one million affordable homes in India through a combination of innovative financing, partnerships and technology, whilst focusing on sustainability.
The firm is in active discussions with leading global investors to raise additional funds to be invested in development of affordable and mid-income housing projects in India, the statement further said.
Mohamed AlQubaisi, Executive Director of the real estate department at ADIA, said, “This agreement builds on our successful investments in the H-CARE funds and underlines our belief in the positive long-term outlook for affordable and mid-market housing in India.”
In January, HDFC Capital had raised $1.88 billion for its new real estate fund with ADIA as the main limited partner (LP) as it marked the initial close of its third fund focused on affordable housing projects. The UAE Emirate’s sovereign wealth fund had backed HDFC Capital’s first two funds as well which cumulatively form a $1 billion platform.
The HDFC Capital Affordable Real Estate Fund–3 (H-CARE-3) received commitments in excess of $1.22 billion to hit the first close. This is one the largest funds raised to invest in the residential real estate sector in India.
The new fund, to be deployed over the next 4-5 years, will provide long-term funding across the lifecycle of affordable and mid-income housing projects including early-stage funding. In addition, it will also invest in technology companies, such as construction technology, fintech and clean-tech firms, engaged in the affordable housing ecosystem.
HDFC Capital said it aims to finance the development of one million affordable homes in India and that it is in active discussions with global investors to raise additional funds to be invested in affordable housing.
Established in 1976, ADIA is a globally-diversified investment institution that invests funds on behalf of the Government of Abu Dhabi.
In December, ADIA and other funds including Blackstone’s Asian real estate fund, joined Indiabulls Housing Finance as an investor.
