IFC to invest US$ 38 million in 3 housing finance companies

Chennai: International Finance Corporation (IFC) plans to invest $38 million in housing finance companies (HFCs), which are focused on affordable housing finance segment.

The World Bank's investment arm said the proposed investment involve an investment of up to $38 million in non-convertible debentures (NCDs) issued by Aspire Home Finance Corporation Limited (Aspire) Micro Housing Finance Corporation Limited (MHFC), and Aptus Value Housing Finance India Ltd. (Aptus).

The project is intended to support the HFCs in increasing its reach in the affordable housing finance segment. The investment would provide financing to affordable housing finance companies operating in India with focus on small and micro loans, said IFC.

The proposed investment is consistent with the World Bank Group's India Country Partnership Strategy (CPS) as it aligns with the engagement areas of (i) Inclusion - by improving access to affordable housing finance and enhancing investment in the low income states (ii) Transformation - through job creation by supporting the labor intensive affordable housing segment and (iii) Integration - giving increased access to financial services in Tier II and Tier III cities.

Aspire is a Housing Finance Company registered with National Housing Bank (NHB) which commenced operations in 2014. Aspire has exclusive focus on retail home loans with an average ticket size of around Rs 1 million.. The Company was promoted by Motilal Oswal Financial Services Limited, which currently holds majority shareholding, the balance held by Anil Sachidanand, the MD/CEO of the company.

MHFC is a Housing Finance Company is focused on providing small and micro housing loans to acquire new housing units for the urban poor with an average ticket size of around Rs 400,000. The company was promoted by Madhusudan Menon, Rajnish Dhall and Nachiket Shelgikar, who together with Employee Share Trusts currently hold the largest shareholding. The balance is held by the Michael and Susan Dell Foundation, India Financial Inclusion Fund, Unilazer Vetures.

Aptus is focused on providing housing loans to the self-employed, informal segment of customers belonging to the low-middle income group, primarily from semi urban and rural areas of South India. Its average ticket size of loans is around Rs 600,000. The company was promoted by M Anandan, who continues to be a significant shareholder. The balance is held by Westbridge Capital, India financial Inclusion fund and Granite Hill Capital Partners.

The three HFCs are exclusively focused on providing access to housing finance to low income borrowers, specifically those employed in the informal sector such as self-employed micro-entrepreneurs and un-organised sector salaried workers. This segment is largely ignored by the large HFCs and Banks owing to perceived higher risk profile of such borrowers and difficulty in credit assessment.

IFC's investment will expand the availability of housing finance to the low income and relatively excluded customer segments. The debt will help diversify the funding profile of the Companies, which are currently largely dependent on banks and NHB for their funding needs. It will also provide them with long term debt of 7 years which is also not readily available.

"IFC's investment will provide comfort to other potential lenders and investors in providing debt to the covered HFCs and also to others operating in affordable housing segment," said the World Bank's investment arm.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.