India’s ArthVeda Fund Management Pvt. Ltd. (AVFM) yesterday announced that Qatar Holding (QH) has committed to invest $250m in its affordable low and middle income (LMI) fund, which projects an IRR in excess of 18 – 21 percent.
The Mumbai-based AVFM is in the business of asset management, with a focus on alternative investment funds covering Indian real estate. AVFM is a part of the BSE & NSE-listed Dewan Housing Finance Limited (DHFL) group, India’s second largest private mortgage finance company, managing mortgage assets of over $12bn.
Bikram Sen, CEO of Arthveda said that the subscription of the entire corpus of its FDI-compliant affordable housing fund by Qatar Holding (QH) was the first substantial foreign inward investment into India’s affordable housing segment spanning LMI residences, immediately after India presented its Union Budget on February 1.
The sweet spot of LMI residential real estate in India offers a significant opportunity to grow investments and AVFM will continue to build on this success by conceiving more of such vehicles. AVFM has built a robust track record and are uniquely positioned to successfully manage such investments.
According to ArthVeda, it is estimated that India needs to build 19 million urban housing units in the low and mid-income category by 2022 across Tier 1, 2 and 3 cities which requires a capital of $1trn.
AVFM is part of Wadhawan Global Capital, a financial services conglomerate, with Dewan Housing Finance Corp. Ltd (DHFL) as the flagship entity. DHFL has over three decades of track record in lending to LMI segment in India. It has lent over $25bn to this segment and overall, DHFL along with its associate housing finance company, Aadhar Housing Finance, lends on an average $350m in a month to home buyers at more than 500 locations in India.
“AVFM’s Affordable Housing Fund leverages our entire group’s leadership in the LMI lending segment and applies that to investments in affordable housing. I am very proud that a prestigious institution from Qatar has invested in this fund through Arthveda,” said Kapil Wadhawan, Chairman and Managing Director of DHFL and ArthVeda.
Apart from the Affordable Housing Fund, which is AVFM’s first offshore fund raising, other domestic real estate funds of the asset management company have been extremely successful. AVFM’s domestic $17m Dream Fund, which exited in 2015 gave a gross IRR of 17 per cent (net to investors). A mid-income $22 million domestic Star Fund I, which is due to achieve exits from all its investments in the next couple of months, will give equally high returns. A domestic low-income housing fund, Asha, is currently in deployment phase.
According to AVFM, the great push by India to make affordable housing a centre- piece of the country’s growth agenda will trigger more foreign investments into this sector. The positive FDI policy changes that have happened in this segment will also continue to give a boost to inward investments. The Government of India has gradually removed minimum project and investment ticket size restrictions in this segment, which should significantly catalyse development and investment.
There is huge emerging and latent demand for affordable housing in this LMI segment and the quick absorption rate, low cyclicity and low average investment ticket size makes it a very attractive investment proposition, according to AVFM.
