Bengaluru: Development Bank of Japan Inc. (DBJ) has made its first real estate investment in India, committing capital to HDFC Capital Development of Real Estate Affordable and Mid-Income Fund (H-DREAM Fund), managed by HDFC Capital Advisors Ltd.
HDFC Capital, the real estate private equity arm of HDFC Group, did not disclose the investment amount. The H-DREAM Fund has a target fund corpus of $500 million and an additional $500 million green-shoe option. It has current investor commitments of over $350 million.
The fund finances projects that prioritize and mid-income housing, and seeks to raise long-term capital from international and domestic institutional investors.
DBJ, wholly owned by the Japanese government, is a financial institution that provides investment and loan services to companies and projects. Its commitment in H-DREAM Fund is significant in terms of its international investment strategy. Last year, World Bank’s private equity arm International Finance Corp. (IFC) committed up to $150 million as an anchor equity investor in the same fund.
HDFC Capital is one of the country’s largest real estate private equity funds, with a focus on affordable and mid-income residential real estate. Its funds combine to create a platform in excess of $4.5 billion.
“The India–Japan relationship is a trusted partnership based on strong institutional cooperation. India has seen increased participation by Japanese investors in its financial and real estate sectors,” Deepak Parekh, non-executive chairman, HDFC Capital, said in a statement. “As a government-owned institution, DBJ’s first investment in real estate in India is significant for us and reinforces long-term investor confidence in the country.”
Through this investment, DBJ will support the Indian , which is facing a housing shortage, more so in the affordable segment, while securing investment opportunities in the high growth market and enhancing the geographic diversification of the bank’s overseas real estate portfolio.
“We are delighted to partner with DBJ in its first investment in India. HDFC Capital’s focus on early-stage financing for quality affordable and mid-income housing positions it well to deepen engagement with investors committed to diversification and sustainable development,” said Vipul Roongta, chief executive officer at HDFC Capital.
DBJ’s investment in H-DREAM Fund is made through HDFC Capital’s offshore feeder fund structure, established under the International Financial Services Centres Authority (IFSCA) framework at Gujarat International Finance Tec-City (GIFT City). Japanese real estate investors and developers entered India much after the American, Canadian, West Asians and Singaporeans did. The Japanese are seen as patient equity investors, betting on land and early-stage projects, and not shying away from taking development risks.
Japan’s realty bets
Investors and developers from Japan are placing large bets on India’s real estate sector, prompted by a turnaround in the office, and residential sectors, and convinced about the country’s long-term economic growth prospects, analysts said.
Post-pandemic, Japanese companies such as Sumitomo Realty & Development and Sumitomo Corp. (both Sumitomo Group firms), Mitsubishi Estate Co. Ltd, Mitsui Fudosan Co. Ltd, Mitsui O.S.K Lines Ltd and its subsidiary Daibiru Corp. and Marubeni Corp, among others, have poured in millions into real estate projects and land parcels, primarily in Mumbai and National Capital Region (NCR).
Japanese investors have entered India’s property sector through direct investments, or alliances with local partners or other international investors.