HDFC Capital Advisors, a significant player in the affordable housing sector, has announced a bold plan to invest over $2 billion in affordable and mid-income housing across India by the end of 2025.

This ambitious initiative is part of a broader strategy to alleviate supply-side constraints and support the development of affordable homes in the country’s top property markets, according to a senior company executive.

The world's largest affordable housing platform, which counts the Abu Dhabi Investment Authority (ADIA) as a key investor, is on track to meet its medium-term goal of financing 1 million affordable homes in India.

This effort is facilitated through partnerships with leading developers and existing platforms.

"The government has just announced support for 30 million affordable houses, including 10 million homes in urban areas.

This represents a $500 billion business opportunity and will require at least $100 billion in investment, which can be sourced from public, private markets, and debt.

HDFC Capital will continue to invest on the supply side of this segment," stated Vipul Roongta, MD & CEO of HDFC Capital Advisors.

The fund plans to deploy at least $1 billion annually over the next two years in affordable and mid-income housing across India's top 15 cities, including the Mumbai region, Delhi-NCR, Bengaluru, Pune, Hyderabad, Chennai, Kolkata, and Ahmedabad.

Of the proposed investment plan, $1 billion has already been committed in the last six months, indicating a robust demand for capital in this segment.

Despite the current perception of a shift towards premium properties in India, the demand for affordable housing remains strong and is expected to persist.

Industry estimates suggest an affordable housing shortage of around 35 million units in urban India by 2030.

However, the development of affordable housing has lagged due to challenges such as high land prices, limited participation from large developers, and financing constraints.

"India has entered a period of demographic dividend expected to last for the next 30 years.

The purchasing power of India will lead to a consumption boom, with over 200 million households projected to join the upper middle class and above by 2030, compared to just 70 million in 2018.

This should result in sustained demand for housing," Roongta explained.

He further noted that despite rising mortgage rates, the demand for housing remains at an all-time high, underscoring the robust market for affordable and mid-income housing.

Roongta believes that this segment is emerging as a key driver for real estate in India, with the realty sector’s GDP contribution expected to rise to nearly 15% by 2030 from the current 7%, due to its multiplier effect on over 250 ancillary industries.

The investment required to meet the affordable housing demand is projected to contribute around $2 trillion to India’s GDP.

In line with the government’s ‘Housing for All’ initiative, HDFC Capital was established in 2016 to finance the development of affordable housing in India by providing flexible, long-term capital to developers.

In HDFC Capital’s portfolio, unit prices start from Rs 12.50 lakh, with approximately 40% of the portfolio comprising units priced below Rs 42 lakh.

To date, the company has invested in over 175 projects, helping develop more than 250,000 units.

HDFC Capital manages a $3.5 billion funding platform, acting as the investment manager for HDFC Capital Affordable Real Estate Funds 1, 2, and 3.

This platform aligns with the Indian government’s goal of increasing housing supply. ADIA, which holds a 10% stake in HDFC Capital Advisors, is also the primary investor in the alternative investment funds managed by HDFC Capital, marking its first global investment in a fund manager.

The funds managed by HDFC Capital provide long-term, flexible funding across the lifecycle of affordable and mid-income housing projects, including early-stage funding.

Additionally, the funds invest in technology companies involved in the affordable housing ecosystem, such as construction technology, fintech, and cleantech.

HDFC Capital’s ultimate goal is to finance the development of one million affordable homes in India through a combination of innovative financing, partnerships, and technology, with a strong focus on sustainability.