SEBI Settles HDFC Property Fund Violations After Investigation; Penalties Imposed for Compliance Lapses

SEBI Settles HDFC Property Fund Violations After Investigation; Penalties Imposed for Compliance Lapses​

Regulator Finalizes Settlement of HDFC Property Fund Compliance Matters​

The Securities and Exchange Board of India (SEBI) has released a formal Settlement Order concerning the HDFC Property Fund and HDFC Capital Advisors Limited. The order addresses compliance violations related to the winding up and management of two schemes: HDFC India Real Estate Fund (HIREF) and HDFC IT Corridor Fund (HITCF).

The settlement was reached after both entities filed suo motu settlement applications under the SEBI (Settlement Proceedings) Regulations, 2018. The applications targeted potential violations of regulation 24(2) of the SEBI (Venture Capital Funds) Regulations, 1996 (VCF Regulations).

Compliance Lapses Identified in Fund Winding Up​

The investigations focused on delays and procedural issues surrounding the conclusion of the two funds. Both schemes were initially constituted with an extended tenure that had ended years prior to their ultimate closures.

In the case of HIREF, the extended tenure concluded on June 17, 2014. However, the fund completed asset liquidation and distribution of proceeds only on March 31, 2021, resulting in a delay of approximately seven years. An amount of INR 5.33 crore was retained for contingent liabilities, which was ultimately distributed to investors on March 25, 2025.

Similarly, the HITCF had an extended tenure ending June 28, 2014. While its assets were liquidated and proceeds distributed on March 28, 2014, a residual amount of INR 0.89 crore was retained for contingent liabilities and subsequently distributed to investors on March 25, 2025.

SEBI noted that these instances highlighted a delay in the winding up process, which constitutes non-compliance with regulation 24(2) of the VCF Regulations.

Role of Investment Manager and Settlement Process​

The proceedings also considered HDFC Capital Advisors Limited, which assumed the role of the investment manager for both funds effective May 2, 2023. The firm’s involvement was attributed to an internal restructuring within the HDFC group that preceded the merger of erstwhile HDFC Limited into HDFC Bank Limited.

Both applicants sought settlement regarding potential enforcement actions initiated against them for these violations. An Internal Committee (IC) of SEBI held deliberations with representatives from both entities on February 10, 2026, to review the matter and discuss settlement terms.

Final Settlement Terms and Directions​

Following internal reviews by the IC, a suggested settlement amount was computed at ₹26,01,000/- (Rupees Twenty-six lakh one thousand only). The applicants submitted revised settlement terms proposing this exact figure in a letter dated February 17, 2026.

The High Powered Advisory Committee (HPAC) reviewed the proposals and recommended settling the matter on these specific terms. This recommendation was subsequently approved by SEBI's Panel of Whole Time Members on May 11, 2026.

In exercise of powers conferred under Section 15JB and Section 19 of the SEBI Act, 1992, SEBI has formally ordered that any proceedings regarding these violations are settled upon payment. The settlement amount is payable jointly by both Applicants.

Implications of the Settlement Order​

The Settlement Order dictates that SEBI shall not initiate any enforcement action against the Applicants for the mentioned violations, provided all terms are met. This agreement represents a final determination on the regulatory matters concerning the fund management and winding up process.

However, the order explicitly states that it is without prejudice to SEBI’s right to take appropriate action if SEBI later finds that any representation made by the Applicants in the settlement proceedings was untrue. Violations could also arise if the Applicants breach any clause or condition of undertakings filed during this settlement process.