HDFC plans special situations fund for stressed projects
BENGALURU: Housing Development Finance Corp. Ltd (HDFC), India’s largest mortgage lender, is setting up a new venture to raise capital for a special situations fund that will invest in stressed projects in real estate as distress deepens in the property sector.
HDFC, which will be a sponsor to the fund, is in talks with investors to raise capital through the alternative investment fund (AIF) route. Kaizad Hazari has been appointed as chief executive officer-designate for the venture.
“The objective is to find opportunities in real estate stressed assets, and then to take over these projects and turn them around,” said Keki Mistry, vicechairman and chief executive of HDFC told Mint.
Mistry didn’t disclose the likely size of the fund.
The real estate sector is an area of core competence for HDFC and its distressed-themed fund comes at a time when the residential sector, in particular, has undergone a nearly five-year long slowdown. Moreover, a stringent regulatory regime under the real estate regulatory authority (RERA) and the aftershocks of the goods and services tax (GST), have led to a prolonged slowdown, increasing debt at developers and unsold inventory with several projects across cities being either stuck or delayed.
HDFC is scanning the market to identify projects that are and where it can help in completing them and offer possession to retail investors and buyers. As an investor, the new fund can either continue with the existing project developer or bring in a new developer.
“We will look at the top 6-8 cities and evaluate opportunities across segments, like residential, commercial office and hospitality,” said Hazari.
HDFC currently handles real estate investment through HDFC Capital Advisors Ltd which raised $550 million in December, in an initial closure of its second affordable housing fund. It also has HDFC Property Fund, which is planning a $500 million overseas fund.
HDFC is not the only one. Other investors are also eyeing similar opportunities.
ASK Property Investment Advisors has its ₹900 crore ASK Real Estate Special Situations Fund for incomplete housing projects either due to sluggish demand or the developer’s inability to complete the project due to a lack of capital.