Apollo makes $1 billion bet on Indian property with lending plan

Residential buildings in Bengaluru. Photographer: Dhiraj Singh/Bloomberg

Apollo Global Management Inc. is planning to lend about $1 billion to developers in India this year, betting on a recovery in the residential property market as the pandemic eases.

That’s up from the $750 million that Apollo lent to Indian developers last year, with two-thirds of that sum directed to residential projects, according to Nipun Sahni, a partner at the private equity firm. About 70% of this year’s lending will go to home builders and the rest to commercial developers.

“The market volumes are back to pre-Covid level and in some markets it’s higher than 2019,” Sahni said in an interview. “It is consolidating rapidly, with the number of unsold homes in India at 10-year low, which is a sign that prices can have an uptick.”

India’s housing market saw a strong rebound from the depths of the coronavirus pandemic as low interest rates and discounts by developers fueled demand. Low inventory levels will likely sustain the boom in residential property market where prices could rise as much as 10% across the nation’s top six cities, according to a Crisil Ratings Ltd. report on May 10.

The country’s office property market is benefiting from more hiring in startups, thanks to the increasing number of initial public offerings and the expansion in the technology industry overall, Sahni said.

Apollo, which opened its Mumbai office in 2008, currently manages about $513 billion of assets globally, according to its website. The firm began lending to Indian property developers in 2017.

A year later, shadow banks like IL&FS Investment Managers Ltd. and Dewan Housing Finance Corp. ran into troubles, leading to dislocation in the local credit market. Apollo stepped in, increasing its lending activity. When financing demand grew during the pandemic, the business took off, Sahni said.

The private equity firm plans to hire two more bankers this year to beef up its 12-person team at the real estate arm in India, he said.

“We have the appetite to continue investing and capitalize on the dislocation in the financing markets in India,” the partner said. Apollo’s average loan size will be between $40 million and $60 million, he said.

The war in Ukraine and supply chain issues could potentially weigh on India’s property market. The country’s central bank earlier this month surprised investors with an interest rate hike, draining liquidity from the banking system, with Reserve Bank of India Governor Shaktikanta Das citing persistent inflation pressures.

Rising prices of commodities including those used in construction, together with pent-up demand for homes, will likely drive up real estate prices in India, according to Sahni.

“Covid has made people realize home is not just a roof over your head to sleep but it is the most important part of you and your family’s life,” Shani said. “All three categories including affordable, premium and luxury are currently doing well. So that’s why I say that residential real estate in the near-term, next one to two years, is seeing one of the best periods in India.”