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ArthVeda raises $250 mn for affordable housing in debut offshore fund

07 February, 2017

ArthVeda Fund Management Pvt. Ltd, an associate company of mortgage lender Dewan Housing Finance Ltd, has received a commitment of $250 million (around Rs 1,689 crore) from a unit of Qatar’s state-owned holding firm in its first offshore fund.

Qatar Holding LLC’s commitment is towards ArthVeda’s affordable housing fund, the company said in a statement.

This is the first significant foreign investment into India’s affordable housing segment after the Indian government gave a huge push to the sector in the Budget, said Bikram Sen, chief executive of Arthveda Fund.

Finance Minister Arun Jaitley in his Budget speech on February 1 proposed to accord infrastructure status to affordable housing while expanding the scope of what constitutes such dwellings.

The Indian government has gradually removed minimum project and investment ticket size restrictions in this segment, which should significantly catalyse development and investment, the firm said.

India needs to build 19 million urban housing units in the low- and mid-income category by 2022 across tier I, II and III cities which require a capital of $1 trillion, it said.

“ArthVeda’s affordable housing fund leverages our entire group’s leadership in the low- and mid-income lending segment and applies that to investments in affordable housing,” said Kapil Wadhawan, chairman and managing director of DHFL and ArthVeda.

ArthVeda has aligned its fundraising activity with the Narendra Modi government’s scheme to provide housing to all, which is likely to give a boost to the affordable housing segment. Indeed, over the past two years, a lot of developers have come out with projects catering to the lower strata of the society or floated separate low-cost ventures. Developers including Supertech and ATS in northern India as well as Paranjape Schemes, Omkar Realtors and Shapoorji Pallonji & Company Ltd in the west have ventured into the affordable housing segment. 

The government’s proposal in the Budget is expected to give more fuel to the sector.

While presenting the Budget, the finance minister said 1 crore houses will be built for the homeless by 2019. The allocation for Prime Minister Gramin Awas Yojana has been increased to Rs 23,000 crore for FY2017-18 against Rs 15,000 crore in FY2016-17. The government already has an existing mission – Housing for All by 2022.

To make the affordable housing scheme more attractive, the finance minister also expanded the definition of such units. “Instead of built-up area of 30 and 60 sqm, the carpet area of 30 and 60 sqm will be counted. Also the 30 sqm limit will apply only in case of municipal limits of four metropolitan cities while for the rest of the country including in the peripheral areas of metros, limit of 60 sqm will apply,” Jaitley said.

The finance minister also made some additional tweaks for taxation in the real estate sector that has been facing a slowdown for almost a decade with low customer appetite for purchases given high property prices and borrowing costs.

ArthVeda’s other funds

The firm has raised domestic real estate funds earlier apart from the affordable housing fund.

Last year in April, VCCircle reported that ArthVeda Fund has hit the first close of its ASHA fund for low-cost housing projects and was now planning to float a new scheme.

The company had in 2015 announced its plan to raise Rs 2,000 crore for low-cost housing projects through a series of schemes under the ASHA fund. The first scheme was launched in January 2016 with a target corpus of Rs 150 crore.

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% while the second fund was expected to see exits of 70% its portfolio by March 2016.

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ArthVeda raises $250 mn for affordable housing in debut offshore fund

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