HDFC Capital Advisors plans to invest over $2 billion in affordable and mid-income housing across India's top property markets by the end of 2025, aiming to ease supply-side constraints, according to a senior company executive. The world's largest affordable housing platform, with Abu Dhabi Investment Authority (ADIA) as a key investor, aims to finance 1 million affordable homes in India through partnerships with leading developers.

"The government has announced support for 30 million affordable houses, including 10 million in urban areas. This represents a $500 billion business opportunity requiring at least $100 billion in investment from public and private markets, as well as debt. HDFC Capital will continue to focus on the supply side of this segment," said Vipul Roongta, MD & CEO of HDFC Capital Advisors, in an interview with the source.

The fund plans to deploy at least $1 billion annually over the next two years in affordable and mid-income housing across 15 Indian cities, including Mumbai, Delhi-NCR, Bengaluru, Pune, Hyderabad, Chennai, Kolkata, and Ahmedabad. In the past six months alone, HDFC Capital has committed $1 billion to affordable and mid-income housing projects, highlighting the high demand for capital in this sector.

"Despite the perception of premiumisation in India's property markets, the demand for affordable housing will persist for a long time. Industry estimates suggest an affordable housing shortage of around 35 million units in urban India by 2030," Roongta said.

The development of affordable housing in India has faced challenges such as high land prices, limited participation from large developers, and financing constraints, despite significant demand.

"India's demographic dividend is expected to continue for the next 30 years, leading to increased purchasing power and a consumption boom. By 2030, more than 200 million households will be part of the upper middle class and above, up from 70 million in 2018, driving continued housing demand," Roongta added.

Despite rising mortgage rates, demand for housing remains at an all-time high, indicating robust market conditions. Roongta believes affordable and mid-income housing is emerging as a key driver for real estate in India. The sector's GDP contribution is expected to rise from 7% to nearly 15% by 2030 due to its multiplier effect on over 250 ancillary industries.

"The investment required to meet affordable housing demand will contribute approximately $2 trillion to the GDP," Roongta noted.

HDFC Capital, established in 2016 to finance affordable housing development, aligns with the government's 'Housing for All' goal by providing flexible, long-term capital to developers. Unit ticket prices in HDFC Capital's portfolio start at Rs 12, 500, with around 40% of the portfolio comprising units priced below Rs 420,000. The firm has invested in over 175 projects, developing more than 250,000 units.

Managing a $3.5 billion funding platform, HDFC Capital serves as the investment manager for the HDFC Capital Affordable Real Estate Funds 1, 2, and 3. ADIA, holding a 10% stake in HDFC Capital Advisors, is the primary investor in the funds managed by HDFC Capital. This marks ADIA's first investment in a fund manager globally.

HDFC Capital's funds provide long-term, flexible funding across the lifecycle of affordable and mid-income housing projects, including early-stage funding. The funds also invest in technology companies involved in the affordable housing ecosystem, such as construction technology, fintech, and cleantech. HDFC Capital aims to finance the development of one million affordable homes in India through innovative financing, partnerships, and technology, with a focus on sustainability.

(Source: ET)