HDFC funds eyes distressed realty projects

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Mumbai, September 5: : The property funds of Housing Development Finance Corp and its asset management unit have more than $1 billion of available funding and will look to buy distressed real estate projects, Chairman Deepak Parekh said.

The funds are yet to buy any projects, but he said there could be opportunities within six months if the current downturn in the realty sector continued.

"I would like to see both my funds, the international and the domestic fund, play a much greater role in takeovers and buyouts of real estate projects which are facing difficulty," Parekh told Reuters in an interview on Thursday.

India's top mortgage lender, in which Citigroup holds a stake of about 12 percent, has an $800 million property fund that was raised overseas, and only a third of it is committed, he said.

Its asset management unit raised almost 40 billion rupees ($900 million) under its real estate portfolio management services business last financial year and has invested only 3 billion rupees, Parekh said.

"I expect that some of the developers who have bought land at exorbitant prices will not have the wherewithal to complete the development," said Parekh, who has been with HDFC since 1978. He became chairman in 1993.

"We will function like an asset reconstruction fund," he said.

After five years of boom, real estate firms are battling tepid sales and a cash crunch, with buyers scared away by rising interest rates and some signs of softening in property prices.

A lot of developers flush with funds from the realty boom picked up land without setting aside enough for building the property, as they tended to fund developments out of customer bookings. But now the cycle had been broken, he said.

"For the last 30 years we have been dealing with these builders in good times as well as bad times. We have had times when interest rates were 18-18.5 percent. We still survived and we still supported developers," Parekh said.

"It is not the end of the world if prices come down 20 or 25 percent."

FUNDS DRYING UP

Most developers have delayed land acquisitions as a slide in the stock market, higher interest rates and hard bargaining by private equity investors shuts the door to funding.

Top listed realty firms DLF and Unitech have delayed planned listings of real estate investment trusts (REITs) in Singapore after stock markets soured.

Shares in DLF have lost half their value in 2008, while Unitech's have dropped two-thirds.