Piramal, HDFC, IIFL bet big on affordable housing
Companies to invest ~256 billion; Piramal to put in ~128 billion alone
Piramal Finance, HDFC and IIFL, the biggest investors in real estate, are betting big on affordable housing and are planning to invest $4 billion (~256 billion) in affordable housing projects. Piramal Finance, on Wednesday, said it would invest $2 billion (~128 billion) in affordable housing in the next three years. It has identified an initial pipeline of ~30 billion in metros.
"The five players in any big city will invest in affordable housing and it is going take off in a big way. We want to participate in this growth story," said Khushru Jijina, managing director, Piramal Finance.
Jijina said the company would offer end-to-end solutions such as construction, finance, equity, debt and marketing support for affordable housing projects. "Most investors offer either debt or equity, but we take care of all their financing needs," he said.
Piramal Finance is one of the biggest investors in real estate and disburses over ~20billion every month. It has a loan book of ~300 billion.
Mortgage lender Housing Development Finance Corporation (HDFC)h as also set its sight son affordable housing. It has created a corpus of $800 million with global investor International Finance Corporation (IFC) for lending in the affordable housing segment.
HDFC Capital Advisors, the property fund management arm of HDFC, has created a $1 billion (~63 billion) platform targeted at affordable and mid-income projects. The primary investor is a subsidiary of the sovereign fund Abu Dhabi Investment Authority.
The fund has identified 15 residential projects so far. Its total commitments should reach $550 million by the end of the 2017-18. It has identified key projects of Godrej Properties, Mahindra Lifespace Developers, Signature Global, Radius Developers, Rustomjee Group, and the Acme Group.
“The objective of this fund is to address the supply side of housing by providing long-term equity and mezzanine capital to developers at the land and pre-approval stage of development of affordable housing,” Deepak Parekh, chairman, HDFC, said.
Parekh said the key challenge was identifying projects in the right locations, ensuring clean land titles and partnering developers that have a strong track record on project execution.
HDFC Capital has set up separate platforms with Mahindra Lifespaces and the Prestige group of Bengaluru for affordable housing projects. Another investor, India Infoline Finance Limited (IIFL), is planning to raise separate property funds worth $500 million each. “The segment has seen good sales velocityif the project is in the right market and of the right-ticket size,” said Amit Goenka, chief executive officer and managing director, Nisus Finance Services. Developers of affordable housing projects were seeing margins of over 25 per cent due to lower interest rates and tax breaks, he added.