IFC anchors HDFC Capital’s $1 billion Green Fund, targeting sustainable housing across India’s urban centers

In a landmark move that underscores the growing importance of sustainable finance, the International Finance Corporation (IFC), the private sector arm of the World Bank, has announced an investment of US$150 million into HDFC Capital’s newly launched H-Dream Green Fund. The fund, with an ambitious target size of US$1 billion, aims to accelerate the development of green, affordable, and mid-income housing projects across India’s expanding tier-1 and tier-2 cities.

The investment positions IFC as an anchor investor in HDFC Capital’s green initiative, creating a pathway for additional institutional investors to participate. According to HDFC Capital, the firm plans to raise a further US$850 million from global and domestic institutions to fully realize the fund’s scale.

Addressing India’s dual challenge: housing and sustainability

India faces a massive housing demand, with millions of urban citizens still lacking access to affordable, quality homes. At the same time, cities are under increasing pressure to build sustainably, aligning with national and global climate commitments.

HDFC Capital’s H-Dream Green Fund aims to directly address both challenges. By integrating sustainability benchmarks into financing for housing projects, the fund seeks to reduce carbon footprints, improve resource efficiency, and promote resilience in urban communities.

“For India, housing remains a social imperative and has strong multiplier effects on the economy. The H-Dream Fund integrates sustainability with financing, which will go a long way in addressing the housing gap and building resilient communities,” said Deepak Parekh, non-executive chairman of HDFC Capital.

IFC’s global role in sustainable finance

As one of the largest development finance institutions in the world, IFC has been at the forefront of supporting private sector initiatives that drive sustainable growth. Its investment in HDFC Capital’s Green Fund demonstrates a clear commitment to strengthening India’s green transition while addressing urgent social needs.

“IFC continues to play a pioneering role in facilitating a greener and more inclusive India,” Parekh emphasized, acknowledging the institution’s catalytic effect in attracting further investments.

Echoing this vision, Imad N. Fakhoury, IFC’s Regional Director for South Asia, described the partnership as a benchmark for the future of urban transformation.

“By empowering developers to issue green finance instruments and scale sustainable projects, we are setting a foundation for cities that are not only livable but also climate-resilient,” Fakhoury noted.

Why the Green Fund matters now

India is the world’s third-largest emitter of greenhouse gases, but it also represents one of the biggest opportunities for green investment. Rapid urbanization is expected to add nearly 400 million people to Indian cities by 2050, creating immense demand for new housing, transport, and infrastructure.

Without sustainable financing frameworks, this demand could exacerbate carbon emissions and strain natural resources. However, with initiatives like HDFC Capital’s Green Fund, the shift towards eco-friendly housing projects can help:

• Reduce energy consumption through green building designs.
  
• Lower construction emissions via sustainable materials.
  
• Promote water conservation and waste management in housing societies.
  
• Enable climate resilience in vulnerable urban regions.
  

Such projects also align with India’s net-zero target by 2070 and the United Nations Sustainable Development Goals (SDGs), particularly those linked to sustainable cities (SDG 11) and climate action (SDG 13).

Housing as an economic multiplier

Experts argue that investing in affordable and green housing does more than provide shelter—it stimulates broad-based economic growth. Housing projects create jobs in construction, supply chains, and allied services, while also improving quality of life and health outcomes for residents.

The H-Dream Green Fund therefore has the potential to:

• Bridge the urban housing gap for India’s middle- and low-income groups.
  
• Boost employment in both traditional and green construction sectors.
  
• Encourage private sector innovation in sustainable building technologies.
  
• Attract foreign capital into India’s climate-resilient infrastructure.
  

Global investor confidence in India’s green transition

The IFC’s early commitment as anchor investor is likely to bolster confidence among institutional investors considering entry into India’s growing green finance ecosystem.

India’s regulatory push, including green bond frameworks and climate finance guidelines, has already attracted attention from global investors. The success of HDFC’s Green Fund could serve as a model for similar funds across emerging markets, where sustainable housing is both a social and environmental necessity.

October milestones and beyond

With the IFC investment secured, HDFC Capital will accelerate efforts to bring in the remaining institutional capital needed to reach the US$1 billion target. The fund will likely focus on partnerships with real estate developers who are aligned with sustainability criteria, potentially setting new benchmarks for green housing certifications in India.

Industry insiders expect that as more funds flow into green housing, the cost of sustainable construction will decline over time, much like the cost trajectory of renewable energy over the past decade.

A step toward inclusive, resilient cities

At its core, the H-Dream Green Fund is about building inclusive, livable, and future-ready cities. It represents the convergence of social needs, economic opportunities, and environmental responsibilities—a model that could reshape how urban India grows.

By anchoring this initiative, IFC and HDFC Capital have signaled that climate-conscious urban development is no longer optional, but essential.As India moves into its next phase of urban transformation, initiatives like the Green Fund could serve as powerful blueprints—demonstrating how development and sustainability can go hand in hand.

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