IFC invests Rs130 crore in Aavas Financiers
International Finance Corp. (IFC), a member of the World Bank Group, on Thursday said it has invested Rs130 crore ($20 million) in Jaipur-based Aavas Financiers Ltd.
The company, formerly called Au Housing Finance Ltd, was formed as a subsidiary of AU Financiers (India) Ltd in February 2011, for providing housing finance in rural and semi-urban areas. In June 2016, Au Financiers, in order to fulfil Reserve Bank of India (RBI) criteria for conversion to small finance bank, sold its stake in Au Housing to private equity (PE) investors Kedaara Capital Group and Partners Group.
Aavas Financiers will use the proceeds to extend housing loans to low-income consumers in rural and semi-urban areas who have little or no access to mortgage finance. Aavas’ customers include grocery merchants, dairy supply chains, carpenters, garment traders, and self-employed and salaried workers in the unorganized sector, often without an income proof. Aavas helps fill the home financing gap through its proprietary credit underwriting and assessment tools, that larger institutions are unable to cater because of operational costs and the lack of proven credit history.
“At Aavas, we help fill a critical gap on access to home loans for people working in the informal sector and IFC investment will support to deepen our customer segment,” said Sushil Agarwal, chief executive officer, Aavas Financiers.
This investment is in line with IFC’s strategy to enhance access to affordable housing finance to promote inclusive growth. IFC’s investment will help Aavas expand its reach to unserved and underserved low-income borrowers in Rajasthan, Madhya Pradesh, Maharashtra, Gujarat, and Delhi/National Capital Region, where it has a strong presence through a network of around 111 branches and assets under management of close to Rs2,900 crore.
“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, country head, IFC.
According to IFC, India currently 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.
To address the gap, IFC finances developers to construct affordable residential housing stock, and supports housing finance companies through investments and advisory services.
Since 2010, IFC has invested close to $300 million in six housing finance companies and one mortgage guarantee company in India. In 1978, IFC came in as the founding investor in HDFC to set up India’s first private sector retail housing finance company.