The cause of affordable housing finance in India should get a big boost with the International Finance Corporation, a member of the World Bank Group, coming together with the country's largest mortgage lender HDFCto create an $800-million fund to finance construction of affordable houses.
IFC is expected to pump in $200 million into this fund by subscribing to masala bonds, rupee-denominated instruments, issued by HDFC and to be listed on the London Stock Exchange. Rest of the amount is to be contributed by HDFC from its own resources.
This fund is the first of its kind in the country to support the prime minister’s vision of 'Housing for All' by 2022. Property developers can borrow from this fund provided they build homes that qualify as affordable as per the Pradhan Mantri Awas Yojna. The fund will be managed by HDFC.
“We started working on Indian affordable housing segment in 2009. Our exposure to this segment in India is around half-a-billion dollar so far and we’ll continue to look for opportunities to invest further. The credit behaviour of this class of borrowers is extremely good. Providing a roof over someone’s head serves a lot of purpose and at the same time it makes solid business sense too,” said Subrata Dutta Gupta, South Asia Lead for Housing, IFC.
In order to make the “Housing for All” mission a success, it has been estimated that India will need to build 19.6 million affordable homes. Some 11 million of these houses are required in the urban areas and the rest in villages. If we assume a typical household to consist of five members, these 19.6 million homes will provide a roof to nearly 100 million people.
According to Gupta, home ownership not only lifts the quality of life directly, but also gives a push to the economy by increasing activity and creating a large number of jobs, which is one of the strategic priorities of IFC.