HDFC Property Funds Prepare for Distressed Real Estate Investments
Chairman Deepak Parekh recently announced that Housing Development Finance Corp (HDFC) and its asset management unit have more than $1 billion in available funding. These funds are specifically earmarked for the acquisition of distressed real estate projects, according to Parekh.
Plans for Future Investments
The funds have not made any purchases yet, but the downturn in the realty sector could present opportunities within the next six months. Parekh expressed his desire to see both the international and the domestic funds play a significant role in the takeover and buyout of struggling real estate projects.
HDFC's Property Fund Specifics
Parekh confirmed that HDFC, in which Citigroup holds a 12% stake, has an $800 million property fund raised overseas. Only about a third of this fund has been committed so far. Additionally, HDFC's asset management unit raised nearly Rs 4,000 crore ($900 million) under its real estate portfolio management services business last financial year, with Rs 300 crore already invested.
Market Conditions and Strategy
Parekh anticipates that some developers, who purchased land at high prices, may lack the resources to complete their projects. He stated, "We will function like an asset reconstruction fund." This strategy comes amidst a backdrop where real estate firms face challenges due to slow sales and a cash crunch, exacerbated by rising interest rates and indications of softening property prices.
Historical Context and Future Outlook
Parekh reflected on HDFC's 30-year history of supporting builders through various economic cycles. He noted, "It is not the end of the world if prices come down 20% or 25%."