Several French institutional investors, including public sector fund ERAFP, are investing €515m in a new residential fund run by Caisse des Dépôts.

CNP Assurances, BNP Paribas Cardif, Aviva France and EDF Invest were among the investors in the first closing of the fonds de logement intermédiaire (FLI) vehicle.

Malakoff Médéric and French construction assurer Société Mutuelle Assurances Bâtiment et Travaux Publics (SMABTP) have also invested in the fund.

The fund is being run through Caisse des Dépôts’ Société Nationale Immobilière (SNI) subsidiary and will invest in the Paris region and major French cities where there is a housing supply deficit
 for middle-class tenants.

SNI said the fund’s creation was a “major step” to revive France’s construction sector and bring institutional investors back to the residential market.

NLI said fundraising for the vehicle would continue through the second half of this year.

The vehicle was launched following a change in taxation in January this year for institutional investment in France’s residential sector.

The fund will benefit from a reduced rate of VAT, as well as exemption from property tax for 20 years.

The €17bn Etablissement de Retraite Additionnelle de la Fonction Publique (ERAFP) was advised by AEW Europe, hired in 2013 to manage a socially responsible investment strategy, which could include French housing.

Earlier this year, ERAFP made its début foreign investment, buying a Stockholm office in May through AXA Real Estate that it had mandated in July last year to source investments.