ArthVeda to raise $315M realty fund for low-cost housing

ArthVeda Fund Management Pvt Ltd (AVFM), an associate company of Dewan Housing Finance Ltd (DHFL), plans to raise a corpus of Rs 2,000 crore ($315 million) for investment in residential real estate aimed at the low-income group (LIG), the company said in a statement.

Christened as ASHA, the fund has been launched in collaboration with Aadhar Housing, a joint venture platform formed between Dewan Housing and International Finance Corp (IFC) to exclusively extend mortgage finance to low-income households.

The fund aims to tie up with developers focused on development of affordable housing across geographies including tier II&III cities.

"ArthVeda leverages our knowledge and leadership in the low and middle income households (LMI) space to investments in affordable housing. In 2010, we formed a JV with IFC (Washington) to create Aadhar Housing Finance Ltd (AHFL). The launch of ASHA Fund will make ArthVeda a prominent private equity player in the LMI housing segment,” said Kapil Wadhawan, chairman and managing director, DHFL, AHFL and ArthVeda.

“ASHA fund has been in the making for some time after the success of our affordable housing fund for middle income households, STAR Fund. It is a matter of satisfaction to us that the launch of ASHA Fund coincides with announcement of the Pradhan Mantri Awas Yojana (PMAY). ArthVeda is proud to join in the efforts of PMAY in creating affordable housing stock,” said Bikram Sen, chief executive officer, ArthVeda.

“Expertise of the group companies in the LMI segment and a vast ground force enable ArthVeda to significantly reduce investment risks,” he said.

The company has scaled up the corpus of the fund after announcing early this year that it will be raising Rs 150-200 crore under ASHA. Now, it is looking at scooping up the overall corpus in chunks of Rs 200-400 crore. It will reach out to domestic investors such as banks, insurance companies and family offices for the fundraise.

Simultaneously, it is raising an offshore fund focused on mid-income housing projects with a target corpus of $250 million. The fund is tapping offshore investors for this scheme.

These two funds take the total fund count of the firm to four. Earlier, it managed two funds—Dream Fund I and Star Fund I—which has a total asset under management (AUM) of $40 million. The first fund has been fully exited and the company claims to have clocked internal rate of return (IRR) of 7-45 per cent while the second fund is expected to see exits of 70 per cent portfolio by March 2016.

With the latest fund, the firm joins a host of players out to raise capital for residential real estate including affordable housing. Kotak Realty Fund is raising a $250 million fund for affordable housing; Indiabulls is out to scoop up two funds from domestic and offshore investors, among others. 

Given the focus of the fund, ArthVeda has applied for a change in the current status of ASHA fund from AIF CAT II to AIF CAT I.

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