Mumbai: International Finance Corp. (IFC), a member of the World Bank Group, will invest $25 million in Mahindra Rural Housing Finance Ltd.
IFC said on Monday that the housing finance subsidiary of Mahindra Finance will utilize the funds to offer small home loans.
“There is high demand for affordable housing, particularly in rural and semi-urban areas. The supply is beginning to increase. IFC’s investment will send a positive signal to investors, increasing confidence and encouraging potential creditors to provide long-term debt to this sector," said Arun Kumar Sharma, chief investment officer, IFC.
Sharma added that the investment will not only help in improving the living standards of the rural population, but will also help generate jobs in the housing construction industry.
As on 30 June, Mahindra Rural Housing’s loan book was at ₹ 7,083 crore. About 85% of its portfolio is in the rural areas. For the April-June quarter, the company’s net profit stood at ₹ 31 crore.
It has extended loans to over 700,000 households across India.
“Most housing finance in rural areas is for incremental construction or completion of homes, and the lack of appropriately designed product options is a key challenge. We identified this need and built an innovative business model around it. There is great potential for growth in this segment. This association with IFC will help us capitalize on these opportunities, while making a huge social impact," said Ramesh Iyer, vice-chairman and managing director, Mahindra Finance.
The average loan ticket-size for Mahindra Rural Housing is around $1,200. According to the 2011 Census, India has a housing shortage of 62.5 million units, with over 90% of the shortage in low-income categories.