IFC commits $150 million to HDFC Capital's $1 billion green affordable housing fund H-DREAM

To expand access to sustainable financing for property developers in India, IFC has committed up to $150 million as an anchor equity investment in H-DREAM Fund (HDFC Capital Development of Real Estate Affordable and Mid-Income Fund) managed by HDFC Capital, the real estate private equity arm of the HDFC Group.

HDFC Capital, a subsidiary of HDFC Bank, will manage the Fund, which has a target corpus of $1 billion ($500 million, with a green shoe of $500 million). The Fund will finance projects that prioritise affordable and mid-income housing, while implementing the green building framework as per the sustainability standards.

Private credit fund H-DREAM prioritises the development of green, affordable and mid-income housing. A statement says IFC’s commitment is expected to help mobilise up to $850 million (including sponsor commitment) of long-term capital from institutional investors. Additionally, the fund will enable the development of at least 25,000 green, affordable and middle-income housing units.

Notably, in India, an estimated 275 million people, 22% of the population, lack access to adequate and affordable housing, while urban housing shortfalls stand at approximately 18 million housing units in Tier 1 and Tier 2 cities.

“For India, housing remains a social imperative and has strong multiplier effects on the economy. The H-DREAM Fund integrates sustainability with financing, which will go a long way in addressing the housing gap and building resilient communities. IFC continues to play a pioneering role in facilitating a greener and more inclusive India,” said Deepak Parekh, Non-Executive Chairman, HDFC Capital.

Green affordable housing not only meets the urgent need for inclusive housing, it also advances sustainability in urban development.  "By empowering developers to issue green finance instruments and scale sustainable projects, our partnership aims to create jobs, build resilience, improve livability in cities,” said Imad N Fakhoury, Regional Director for South Asia, IFC.

The buildings sector accounts for about 33% of total electricity consumption globally, with residential buildings accounting for about 24%. Greening this sector is crucial to sustainably bridge the housing gap. As per the IFC estimates, there is a potential investment opportunity of $1.4 trillion in India’s green buildings market by 2030. Of this, $1.25 trillion, nearly 90%, will come from the residential sector.

“HDFC Capital will channelise global and domestic capital to address the most basic social need of housing in India and we are witnessing interest from global and domestic institutions and Indian family offices with in-principle commitments of $350 million in place already,” said Vipul Roongta, MD & CEO, HDFC Capital.

The statement says the Fund’s adoption of IFC’s E&S Performance Standards and EDGE Green Building Framework will ensure sustainability is at the heart of every project.