Full transcript of “Global Interest in India’s Affordable Housing”. Click a timestamp to open the video at that moment. Need another video? Use the YouTube transcript generator.
0:00 Perhaps we're seeing some stability in the Indian market now. We've seen the West, possibly in terms of fund raising, given where the Indian rupee is right now, still hovering at record lows. What are you seeing in terms of fundraising? Oh, uh, we are we are part of HDFC Group, which is one of the top ten banks in the world in terms of market cap. And we have never seen so much interest, uh, for long term investments into India. Uh, as far as we are concerned, we are like as you mentioned, we are about four, $9 billion, ten year old firm focused only on housing. And the good thing is that we are raising money only from global investors who are looking at mid to long term outlook in India.
0:45 Uh, today we are $4.5 billion. I can see that the kind of interest we are seeing, whether it's Middle Eastern brothers, European, Korean, Japanese investors, uh, I have not seen it in my career in the last 25 years as part of the Indian ecosystem is concerned. Why? What are they saying about India's real estate and private credit market? Why is there so much interest? So, you know, if I break it down, first of all, the Indian ecosystem the way it is, where else? We are talking about a billion people who are below the age of 35. What aspirations for English speaking? And for the first time probably in its history, have a very, very sound physical and digital infrastructure
1:34 tailwind. India has always, if I can use that word, it has always failed to probably disappoint the most optimist and the most pessimist people. Whenever people feel that India is not going to move in the Covid times something, it bounced back when people said it will probably just rocket and, uh, probably be the most crazy market across the world. It has probably disappointed both sides of things, and a large part of it was the constraints, which are more geopolitical, which is our dependence on oil. But the demons attached to things like physical infrastructure, like airports. In ten years, 12 years in India, number of airports in India have tripled. Our physical infrastructure like roads, airports, railways, uh, docks.
2:23 We have not seen that kind of infrastructure push in this country ever in the last 60, 60 and 65 years. And that got bored with the fact that we have a full digital infrastructure. We now have 1.4 billion people who have a single ID, we have health insurance, we have accident non-life insurance, all kinds of stuff that is coming into that ecosystem. Those benefits are now coming forward. And long term investors, people are looking at even say, 3 to 5 year perspective. I understand that headwinds related to say, maybe the recent oil thing or what is happening as the war is concerned and they are just blips, Uh, the long term infrastructure growth, the long term fundamentals of the economy be very,
3:08 very strong. So we are very bullish. And that's what we are seeing. So translate that for us in terms of, you know, concrete numbers in terms of your own investment. Uh pipeline. What are you looking at for the next 1224, 36 months? So we are looking at doubling our fund base. Uh, it has taken us ten years to reach from 0 to $4.5 billion. We are looking at doubling this in the next three years. That's the kind of, uh, outlook we are seeing in terms of investor interest as a deployment is concerned. Just to give you some numbers, uh, in the Indian housing ecosystem, we are talking about 30 million units, uh, being the shortfall, the annual supply that we have aside, the entire industry is concerned is 600,000 units.
3:56 And so we are talking about something like 2% of the entire ecosystem being constructed. What we need is a massive construction boom, uh, with a little bit of headwinds related to it and what is happening on the I and so on, so forth. We feel that there will be a tremendous support. And, uh, the fact that, uh, there's so much demand, we push a lot of physical housing stock into the market. Um, talk to us. Why do you talk about $4.5 billion in terms of AUM? How will that be deployed? When you take a look at both affordable housing and middle income housing. What's the plan there? So the plan is very simple. Plan is that what we lack in India is not, um, uh, housing. What we lack is urban quality housing. As I said earlier, uh, the average
4:45 Indian is very aspirational. Today we have the tailwind of the physical and digital infrastructure. So what we need is small homes, high quality homes in the urban areas, which is now not the top five cities, but the top 25 cities. Um, today we are seeing the emergence of large cities. So Delhi or Bombay or Bangalore, which are cities, are no longer city. Their regions, what they call as copper regions of Delhi is called NCR National Copper Region of Delhi. Bombay them are Mumbai Metropolitan Region of Delhi, which is nothing but a hub in scope of about 10 to 15 cities, which are very nicely connected with each other from these various infrastructure initiatives. So what is happening is that the percent of people are shifting from tier 23
5:30 towns. They are much closer to the Gila worm towns. And we see emergence of a lot of middle income housing, housing between $100,000 to $200,000. Within these cities. And the problem is that it is a supply constrained market. It requires long term capital. It requires private credit because traditionally, Indian ecosystem and minority equity positions, private equity positions have not done well. So a lot of global investors, whether it is a Blackstone's or the cows or for that matter, Brookfield or anybody else, they are investing and they are investing and in doing, they're keeping that long term factor in mind. The thing is, there is so much interest, so much potential. Yet developers find that this is a segment that is really hard to monetize.
6:20 Why is that? So yeah. Okay. Let me put it this way. Let's look at do this. When you are investing in India, you are looking at all sectors and infrastructure and real estate side, more of the real estate risk. And you take taking up counterparty risk. I think where India has probably not done as well in about 7 or 8 years back, is the counterparty risk. Real estate, uh, if you talk specifically, housing specifically has done excellently well. But the real estate investors to, uh, whether it's directly to the developer ecosystem or for that matter, even fund ecosystem have not done as well because of various governance related issues, because of various things wrong and writings or too much euphoria on macro. India is a micro play. Even if macro is good, you cannot just
7:09 leap in and buy in this as one of the holding ecosystems, and then you have to get your hands and feet dirty. You have to get the right fund managers. We have been in business now for 25 years or 20 years, specifically on the fund side and print and time and again we are now in our first form. We have seen the same set of investors coming back again and again, because the idea is to play mid risk ideas to do. We are doing in uh in senior secured private credit. This is not the general private. It is in probably in India. Private credit means senior secured credit Tina secured credit. We are doing 12 to $14 returns which is just unparalleled now which is what is attracting the global investors. Right. Is there a risk, though, that you might
7:54 see stress in financing this sector? Obviously, every sector has its own risk. Uh, this real estate industry in general, uh, as I said from an investment perspective, has probably just been average. Uh, it totally depends on the investor. Uh, and the investor. Manager, I see from a risk perspective, uh, there may be some headwinds related to oil and some things related to some temporary blip on super premium housing, but middle income. And, uh, when I said housing between $80,000 to $1000, we think it's only a supply side challenge. It is only an issue that can as a developer, I make 20% return on return on equity on my business.
8:41 And, uh, given what is happening on what you know, I was hearing the previous panelists talking about outlook on Indian stock market, if that is what it is, and the stock market doesn't give that kind of returns, we see a lot of, uh, investors coming on the physical side of the market. So we are very bullish. Uh, we think that while the risks are there, uh, the risk adjusted return can never be probably better. Vipul, is there anything the government can do to address, you know, affordable housing in India. We know that construction costs are rising. Land costs are also high right now. Would you like to see the government, you know, implement some measures to to help alleviate the problem? So, you know, we are a federal
9:28 structure, um, as we know in India, why the government has a huge role to play. I think it is more symbolic. It is more in terms of giving guidance in terms of what you should do and giving in terms of indication. I think the government is very serious. Uh, the first initiatives that the that the government in this third uh, term made was about urban housing. That was the first cabinet decision that was taken by the government. The government is very, very serious because for every rupee or every dollar that is spent, uh, in Indian housing, the domino effect of, uh, various other industries is almost to the extent of two point global 2.5 states. And, uh, they are really serious. There is a lot of initiative that is
10:14 being done at the state level called land is a state subject in India, uh, to ease the supply of land, uh, to see that the construction gets much better than we have seen in the last ten years, a real state law related to, uh, construction. We have a regulatory authority now. So the instances of what is bad investments has significantly reduced. Uh, we think that the government can do some more stuff related to giving the indication in terms of ground level releasing some, uh, land banks, us at the state level with various public sector utility undertakings. But it's happening. Uh, we are very, very, uh, uh, confident that, uh, what the government is doing is having its head in the right place.
10:59 They don't want to go berserk in terms of things and focus on, uh, using their capital, on infrastructure and leave the housing and real estate to the private sector to do, which is the way I think it should be.
