In a major fillip to the government’s housing for all scheme, the International Finance Corporation (IFC) has joined hands with HDFC Ltd to create an $800-million fund to finance the construction of affordable homes.
The IFC, part of the World Bank Group, will put in $200 million by subscribing to masala bonds issued by HDFC and to be listed on the London Stock Exchange. HDFC will contribute the remaining $600 million from its own resources, according to souces close to the development.
“Property developers can borrow from this fund if they build homes that qualify as affordable under the Pradhan Mantri Awas Yojana (PMAY). The fund will be managed by HDFC,” a source said.
Housing and Urban Affairs Minister Hardeep Singh Puri had said on Wednesday the government had revised downwards the housing shortage number in urban areas, cutting it almost by half. The estimate of housing shortage in urban areas, Puri said, had been revised to about 10-million units from the 2011 projection of 18.76 million.
In 2010, the IFC formed Aadhar Housing Finance, India’s first private sector institution focused exclusively on housing finance needs of the low-income segment. It has invested another $300 million in six other housing finance companies and a mortgage guarantee company in India.
“The IFC hopes that its partnership with HDFC and the new fund will give a fillip to the construction of affordable homes by bridging, to an extent, the gap of finance. As the ripple effect, it should encourage other players to enter this area, as happened in other sectors such as renewable energy and microfinance once the IFC stepped up its funding there,” the source quoted above said.
A number of initiatives have been taken to push the housing for all scheme. On Thursday, the government decided to increase the home size for the middle-income group (MIG) under the credit-linked subsidy scheme (CLSS).
In a Cabinet meeting chaired by Prime Minister Narendra Modi, the government approved increasing the carpet area in the MIG-I category of CLSS from the existing 90 square metres (sqmt) to up to 120 sqmt. It also increased the carpet area in respect of the MIG-II category from the existing 110 sqmt to up to 150 sqmt. The changes are effective from January 1, 2017.
“The government’s decision to enhance the classification of affordable housing by extending the carpet area to a maximum of up to 150 sqmt (over 1,600 square feet) translates into the ticket size of Rs 40 lakh to a crore. The increase in the threshold limit will enable the MIG buyers to avail of interest rate subvention under CLSS, but would dilute the impact for the lower strata of the society with lower ticket size. We believe subsidies may be more effective, if restricted to the EWS/LIG segment in the interest of inclusive goal of housing for all,” said Rajesh Krishnan, founder and CEO, Brick Eagle.