Affordable housing, long framed as a policy challenge that needs subsidies and government support, is increasingly being structured into a scalable private credit strategy in India.
Affordable housing, long framed as a policy challenge that needs subsidies and government support, is increasingly being structured into a scalable private credit strategy in India.
For Vipul Roongta, chief executive of Indian private equity investment manager HDFC Capital Advisors, the shift reflects a simple premise: affordable housing can be profitable if made bankable.
“Without an enabling environment, affordable housing will always struggle,” he says in an interview with Asia Asset Management. “But if land is appropriately priced, approvals are timely and capital is structured properly, the private sector can scale supply profitably.”
The firm has a roughly US$4.5 billion platform of funds that focus mainly on affordable and mid-income housing across leading cities in India.
Roongta says housing demand in the country is driven largely by the middle class, a segment of the population that doesn’t rely on subsidies and is also the least cyclical in real estate. However, supply has lagged because of limited developer participation due to thin margins and execution risks.
He says HDFC Capital, a firm owned by HDFC Bank, is addressing these constraints by structuring investments through disciplined underwriting and partnerships with governance-led developers.
This approach underpins its latest vehicle, the HDFC Capital DREAM Fund, which targets green affordable housing while aiming to deliver a gross internal rate of return of 16%-18% in Indian rupees.
According to Roongta, the fund, anchored by the International Finance Corporation, the World Bank’s private sector investment arm, has attracted a mix of global and domestic institutional investors. He says foreign investors are allocating to the fund partly because Indian capital market rules allow for flexible exits.
He says India’s mortgage-to-gross domestic product ratio is about 11%, well below the share in many other Asian countries, suggesting significant room for growth.
Although competition in private credit is stiff, he says the opportunities continue to grow and that his firm maintains a disciplined approach, focusing on structured capital solutions and avoiding pressure to chase higher yields.
“Rate tailwinds help at the margin, but outcomes depend on partner quality, project selection, structure and execution,” he says
The next phase for HDFC Capital, according to Roongta, isn’t just about expanding assets under management, but building a broader ecosystem that accelerates supply and improves affordability.
