IFC invested in Aavas Financiers Ltd. to extend Affordable Housing Loans
The strategy of IFC, a member of the World Bank Group is 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’. IFC 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.
Aavas helps to fill the home financing gap for those who are either self-employed or salaried workers in the unorganised sector, often without an income proof. For this segment larger institutions normally don’t cater because of operational costs and lack of credit score or proven credit history.
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.
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.
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.