Home / Companies / News /  PNB arm, IFC tie up to raise $800 mn for affordable housing

Mumbai: PNB Housing Finance Ltd has tied up with International Finance Corporation (IFC), part of the World Bank Group, to raise $800 million for green and affordable housing in India, a person with knowledge of the matter said.

IFC is in negotiations with two other housing finance firms to invest another $150 million, as well as with property developers to assist the Pradhan Mantri Awas Yojana (PMAY) from both the demand and supply sides, the person said, requesting anonymity.

The move comes as a big boost to Prime Minister Narendra Modi’s housing for all scheme by 2022. Under PMAY, the government offers interest subsidy of 6.5% to economically weaker sections on their home loans. The scheme is for people with an annual income up to Rs3 lakh.

As per the deal with PNB Housing, IFC will make $400 million available for the new facility, of which $150 million will be its own money and the rest will be mobilized from other sources. All of this money will be raised through masala bonds issued by PNB Housing. Masala bonds are rupee-denominated bonds issued in offshore capital markets.

PNB Housing will put up another $400 million on its own, taking the total amount to $800 million. The proposal will go to the IFC board for approval in a couple of months. IFC’s new investments will be separate from the $800 million facility it created with Housing Development Financial Corp. Ltd in 2017 to fund construction of affordable homes.

An email sent to PNB Housing remained unanswered.

According to Mengistu Alemayehu, South Asia director for IFC, the move to invest in India’s housing programme is aimed at improving the supply situation in the market by expanding liquidity and choosing partners carefully in a real estate market marred by controversy. “We have always invested during a crisis because the gap is so high. We don’t have much choice but to get involved in it," said Alemayehu. He declined to comment on the specifics of the investments.

“Home ownership is the biggest element for building a middle class society. Some of the developers are saying that they cannot meet the demand since they don’t have the demand. The gap is so huge. We had to walk in," he added.

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