A unit of Mumbai-headquartered HDFC Bank, India’s biggest lender, is on to the road to raise a whopping $2 billion for a real estate private credit fund as demand for new homes increases in the country.
The development was first reported by Bloomberg. HDFC Capital Advisors Ltd is gearing up to raise $1 billion, with an option to expand the fund size by an additional $1 billion, the report stated, quoting sources familiar with the matter.
The fundraising development signals increased investor interest in India’s real estate sector where developers are rushing to launch projects to meet a huge pent-up demand post-pandemic.
In the private equity space, Motilal Oswal Alternates, the alternative investment arm of Motilal Oswal Group, said it is set to raise up to Rs 2,000 crore ($240.6 million) through its sixth real estate fund, strengthening its presence in India’s growing property market.
HDFC typically doles out debt to low-and mid-income housing projects across the country’s metropolitan cities.
According to experts, early-stage investments in real estate offer a significant opportunity, given the crucial capital developers need especially at the beginning of any project, said experts.
According to the Housing.com-ISB Housing Pricing Index, property prices across the country have witnessed a 7.34% spike in June from the year-ago period, while supply rose 6.77%.
HDFC Capital, a subsidiary of mortgage financier Housing Development Finance Corp, recently merged with HDFC Bank. It has committed a corpus of about $3.5 billion to various projects in India.
The lender’s decision to raise a private credit fund comes at a time when when volatility in the equity markets, coupled with a high-interest rate environment, is making it difficult for companies in India to raise capital.
“There is a widespread industry slump resulting from the ongoing high-interest rate environment and global uncertainties. That is pushing companies to opt for private credit instead,” said an industry analyst on the condition of anonymity.
Recently, Piramal Alternatives, a unit of Piramal Group that is controlled by Indian billionaire entrepreneur Ajay Piramal, made headlines when it hit the road to raise a corpus of $1.5 billion, a part of which will be used for its credit fund.