Housing Development Finance Corporation
Limited (HDFC Ltd.), India’s premier housing finance company today
announced its foray into the real estate fund business in India with the
launch of “HDFC Property Fund” in association with State Bank of India (SBI).
A trustee company (HDFC Ventures Trustee Company Limited) and an asset
management company (HDFC Venture Capital Limited) have been incorporated
for the fund. This venture capital fund approved by SEBI would be
investing in equity and equity linked instruments of companies engaged
primarily in real estate in major cities in India.
The fund’s initial scheme called HDFC INDIA REAL ESTATE FUND (HI-REF) is
for domestic investors and has a target corpus of Rs 750 crores with a
greenshoe option of Rs 250 crores. This would be a 7-year close-ended
fund, which would be privately placed. The scheme would have a minimum
contribution of Rs 5 crores per investor and would target banks, insurance
companies, corporates and high net worth individuals for investment.
To achieve a balanced risk-reward profile, the inaugural scheme, HI-REF
will invest in three broad classes of companies:
1.
Projects which are complete – this would comprise real estate assets,
which are in use with established, high-quality tenants. Such asset class
typically would denote steady income type characteristics.
2.
Projects in the development stage - where the lead-time to commercial
deployment is typically between 1-3 years and the completed projects
subsequently would have contractual off-take arrangements in place.
3.
Projects in the planning stage - where the lead-time to commercial
deployment would be 3-6 years. These projects would offer the highest
amount of return although with a greater risk.
Mr. Keki Mistry, Managing Director, HDFC said “The Venture Fund, is an
extension of HDFC’s core business and a value add to its bouquet of
services in the real estate sector. This is a first step and going forward
we hope this will encourage professionalism and provide depth to this
industry.
Ms. Renu Sud Karnad, Executive Director, HDFC Ltd., who would be the
non-executive chairperson of HDFC Venture Capital Ltd., says, “Worldwide
real estate represents a substantial share of fund allocations by
institutional investors but in India this had been hampered by the lack of
credible mechanisms through which institutions could invest in the sector.
With the increase in professional players entering the real estate
business coupled with the recent boom, there has been a lot of demand from
investors for a real estate investment scheme. Now with real estate
looking up as a positive investment option for venture capital companies,
we are confident that the much required Investment inflow into this
industry will be welcomed.”
Recent reports indicate that the share of real estate as a percentage of
India’s GDP has risen from 5.25% to over 7% from 2002 – 2003. Returns from
this sector exceed those for most other investment alternatives in the
market. Yields on commercial real estate across metros in India are higher
than those prevalent in global real estate markets. With the revolution in
the services sector over the last decade, the rise in the sector’s share
of GDP to 50% marks a shift in the Indian economy and takes it closer to
the fundamentals of a developed economy.
The IT and ITES sector has grown phenomenally despite adverse global
conditions and grew by 54% in 2003-04. Apart from this, biotechnology,
insurance, banking and consulting businesses have also been growth
segments driving the demand for real estate. A higher demand can be seen
in the retail segment with an expected influx of clothing and lifestyle
stores, restaurants and beverage chains, entertainment and leisure
complexes.
Adds Ms Karnad, “India is on the move and in particular the Indian real
estate sector is on the agenda of all major international funds and
developers. We also have plans to have a specific international fund
soon”.
Mr. K G Krishnamurthy, Senior General Manager with HDFC, would be the CEO
and Managing Director of the fund.
The real estate sector will benefit immensely and play a key role in
driving India’s economic growth. The immediate requirement is to create a
professional and transparent environment, which helps establish real
estate as a sound investment option. Going forward, the combined strengths
of HDFC and SBI would offer a national network and a strong platform of
financial expertise and reach required for this venture and will be a big
step in the efforts to boost the real estate market.
About HDFC
HDFC, the first specialized housing finance institution in India has been
providing financial assistance to individuals, corporates and developers
for the purchase or construction of residential properties besides
providing property related services, training and consultancy. In its 27
years of business presence, the company has developed close relationships
with all major developers, local development bodies, state governments,
regulators and has a branch network of over 180 offices across the country
catering to over 2400 towns and cities.
For further information, kindly contact:
Mr. K G Krishnamurthy
MD & CEO
HDFC Property Fund
Tel: 56316482
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