IFC invests in Aavas Financiers to extend affordable housing loans to low-income borrowers

By: | Published: July 20, 2017 3:32 PM

IFC, a member of the World Bank Group, has invested Rs 1.30 billion in Jaipur-based Aavas Financiers Ltd to extend housing loans to low-income consumers in rural and semi-urban areas.

IFC, invest, Aavas Financiers, affordable housing loans, low-income borrowers, Housing for All by 2022Specific to affordable housing finance, IFC has invested close to 0 million in six housing finance companies and one mortgage guarantee company in India since 2010.

IFC, a member of the World Bank Group, has invested Rs 1.30 billion ($20 million) in Jaipur-based Aavas Financiers Ltd (formerly known as Au Housing Finance Ltd) to extend housing loans to low-income consumers in rural and semi-urban areas who have little or no access to mortgage finance. This investment is in line with IFC’s strategy to increase access to affordable housing finance to promote inclusive growth and also advances the Prime Minister’s goal of ‘Housing for All by 2022’.

Aavas’ customers include grocery merchants, dairy supply chains, carpenters, garment traders, and others who are either self-employed or salaried workers in the unorganized sector, often without an income proof. Aavas helps fill the home financing gap for this segment that larger institutions normally don’t cater to because of operational costs and lack of credit score or proven credit history.

Using its proprietary credit underwriting and assessment tools, Aavas has helped nearly 35,000 customers buy a home, since its inception in 2012. IFC’s investment will help them expand their reach to unserved and underserved low-income borrowers in Rajasthan, Madhya Pradesh, Maharashtra, Gujarat, and Delhi/NCR. Kedaara Capital and Partners Group are the main investors in Aavas.

“At Aavas, we help fill a critical gap on access to home loans for people working in the informal sector and the IFC investment will support to deepen our customer segment,” said Sushil Agarwal, Chief Executive Officer, Aavas Financiers.

“IFC’s long-term loan and partnership will help us broaden and deepen our funding profile, send a positive signal to other investors, and help us expand our lender base,” said Ghanshyam Rawat, Chief Financial Officer, Aavas Financiers.

Currently, India needs to build 11 million homes in the affordable segment. At an average of 4.6 people per household, the 11 million units’ gap implies that almost 50 million people do not have adequate housing. That is the entire population of a state as large as Andhra Pradesh or countries such as Kenya or Spain.

Bridging such a large gap is a significant challenge and all efforts to do so are directly aligned with World Bank Group’s twin goals of reducing poverty and increasing shared prosperity. Home ownership helps improve living standards and the housing construction industry is a significant employment generator. Both are critical to IFC’s mission. To holistically address the huge demand-supply gap in affordable housing, IFC finances the developers to construct affordable (and green) residential housing stock, and supports housing finance companies through investments and advisory engagements.

“This new investment by IFC in Aavas is one of a series of investments and advisory engagements that IFC has conducted recently in the affordable housing space, aiming to generate strong market momentum contributing to the full realization of the national goal of Housing for All by 2022,” said Jun Zhang, India Country Head, IFC, adding that “Aavas is uniquely positioned in the expansion of the availability of mortgage financing to the affordable housing market segment. Aavas has a strong customer base in Rajasthan and adjoining states where the demand for affordable housing is high. Given the scale of the requirement and the immediacy of the need, IFC is highly committed to supporting like-minded partners in intensifying the flow of financing to the affordable housing market in India.”

Specific to affordable housing finance, IFC has invested close to $300 million in six housing finance companies and one mortgage guarantee company in India since 2010. Several other discussions are in advanced stages. In 1978, IFC came in as the founding investor in HDFC to set up India’s first private sector retail housing finance company. In 2010, it helped form the first affordable housing finance company in India, focused exclusively on the needs of low-income segments.

Since 1956, IFC has invested in over 400 companies in India, providing $17 billion in financing to the private sector from own account and through mobilization.

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