HDFC Capital Advisors is betting big on affordable and mid-income housing with plans to invest more than $2 billion in this segment across India’s top property markets by the end of 2025 to support easing of supply side constraints, said a top company executive.
The world’s largest affordable housing platform that counts Abu Dhabi Investment Authority (ADIA) as its key investor is in the process of achieving its medium-term goal of financing 1 million affordable homes in India through existing platforms set up with leading developers.
“The government has just announced support for 3 crore affordable houses including 1 crore homes in urbans areas. This is a $500 billion business opportunity and would need investment of at least $100 billion that can be infused through public, private markets, and debt. HDFC Capital will continue to invest on the supply side of this segment,” Vipul Roongta, MD & CEO, HDFC Capital Advisors, told ET.
The fund is looking to deploy at least $1 billion annually over the next two years in affordable and mid-income housing across top 15 indian cities including Mumbai region, Delhi-NCR, Bengaluru, Pune, Hyderabad, Chennai, Kolkata, and Ahmedabad, he said.
Of the proposed investment plan, it has committed $1 billion in the last six months to the affordable and mid-income housing projects, indicating the demand for capital in this segment.
“Contrary to the current perception of premiumisation of the property markets in India, demand for affordable housing will continue for long and will not ebb anytime soon. As per industry estimates, the affordable housing shortage in urban India is around 35 million units by 2030,” Roongta said.
Even though the demand for affordable housing is significant in India, its development has not been commensurate with the demand and faced challenges such as high land prices, limited participation from large developers, and financing constraints.
“India has entered a period of demographic dividend which is expected to continue for the next 30 years. The purchasing power of India is going to lead to a consumption boom as more than 200 million households will form part of the upper middle class and above category by 2030 compared to just 70 million in 2018. This should result in continued buzz in the housing demand,” he said.
According to him, one of the indicators of robust demand is that despite the increase in mortgage rates, the demand for housing remains at an all-time high.
Roogta believes that affordable and mid income housing is now emerging as a key driver for real estate in India. The realty sector’s GDP contribution is likely to rise to nearly 15% by 2030 from 7% currently given its multiplier effect on more than 250 ancillary industries.
“The investment required to meet the demand in affordable housing will result in a contribution of around $2 trillion to the GDP,” Roongta added.
In line with the government of India’s ‘Housing for All’ goal, HDFC Capital was set up in 2016 to finance the development of affordable housing in India by providing flexible, long-term capital to developers.
In HDFC Capital’s portfolio, unit ticket prices start from Rs 12.50 lakh and around 40% of its portfolio comprises units priced at less than Rs 42 lakh. It has so far invested across over 175 projects, helping develop over 250,000 units.
HDFC Capital manages a $3.5 billion funding platform that acts as the investment manager to HDFC Capital Affordable Real Estate Funds 1, 2 and 3; and is aligned with the government of India’s goal to increase the housing supply.
ADIA holds a 10% stake in HDFC Capital Advisors, and the sovereign wealth fund owned by the Emirate of Abu Dhabi is also the primary investor in the alternative investment funds managed by HDFC Capital. Globally, ADIA has invested in a fund manager for the first time.
The funds managed by HDFC Capital provide long-term, flexible funding across the lifecycle of affordable and mid-income housing projects including early-stage funding. In addition, the funds will also invest in technology companies including construction technology, fin-tech, clean-tech etc., which are engaged in the affordable housing ecosystem.
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.
