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India’s HDFC targets distressed RE projects

Indian housing lender HDFC will function as an ‘asset reconstruction fund’ targeting developers facing a tougher real estate market. Along with its asset management unit, HDFC will acquire distressed real estate projects in the country.

The Mumbai-based Housing Development Finance Corporation (HDFC), along with its asset management unit, is looking to buy distressed real estate projects, according to HDFC chairman Deepak Parekh.

“I would like to see both my funds, the international and the domestic fund, play a much greater role in takeovers and buyouts of real estate projects which are facing difficulty,” Parekh told Reuters.

HDFC raised $800 million (€561 million) from 28 foreign investors for its real estate vehicle, HDFC International Real Estate Fund, which closed in 2007. Its asset management unit raised almost 40 billion rupees ($894 million; €627 million) in the last financial year through its real estate portfolio management services business, Parekh said. It has only invested three billion rupees of that capital.

Parekh said opportunities could arise within six months given a continued downturn in the real estate market. The funds have not yet acquired any projects.

HDFC would function as an “asset reconstruction fund,” he said, with the expectation that developers who purchased land at “exorbitant prices” would not have the “wherewithal to complete the development.”

The Indian real estate market is now facing “tepid sales” and a “cash crunch,” according to the report. During its five-year boom period, developers flush with funds purchased land without setting aside enough for building the property. That cycle has now been broken, Parekh said.