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India’s HDFC Said to Raise $600 Million for Property Fund

Housing Development Finance Corp., India’s largest mortgage lender, plans to raise its fourth property fund from overseas investors, said two people with direct knowledge of the matter.

Housing Development will seek to raise $600 million for residential and commercial projects in India’s largest cities, starting with an investor roadshow in Singapore from November, said one of the people, declining to be identified before a public announcement. Mahesh Shah, a Mumbai-based spokesman for HDFC, declined to comment.

Property demand has weakened in India’s biggest cities as the country’s central bank has raised the benchmark interest rate 12 times since March 2010 by a total of 350 basis points. That’s the fastest round of increases since the Reserve Bank was established in 1935, Bloomberg data show, and it’s left developers with a shortage of cash and expensive debt.

Raising money shouldn’t be difficult for Housing Development, given its credentials, Pranay D. Vakil, chairman of real-estate agency Knight Frank India Pvt. Ltd. said. “The more difficult problem these days is deploying money in the right kind of assets. A lot of funds have deployed money and not all of them are successful.”

Housing Development will mainly tap investors from the Asia-Pacific region and the U.S. for the private equity fund, said one of the people. The Mumbai-based company aims to invest about 40 percent of the fund in residential projects on the outskirts of India’s largest cities, and as much as 30 percent in commercial developments, said one of the people.

Three private equity funds have raised a combined $248 million for India-focused real estate investments in the first nine months of this year, according to data provided by Venture Intelligence, a Chennai-based research service. That compares with $75 million raised by one fund in 2010, it said.

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