World Bank Group, HDFC create fund for affordable houses
NEW DELHI: The World Bank Group has tied up with HDFC Ltd to create an $800 million fund to finance construction of affordable homes.
Property developers can borrow from this fund if they build houses that qualify as affordable ones under the Pradhan Mantri Awas Yojna (PMAY) for urban India. Through this scheme the Modi government proposes to provide houses to all urban poor by 2022. This fund will be managed by HDFC and will be available for five years. The loan pricing and choice of developers will be decided on the basis of creditworthiness, track record and ability to develop.
India needs to build 19.6 million affordable homes to provide housing for all. Of this, 11 million are to be in the urban areas and the rest in villages.
Computing five members to a household, those 19.6 million homes will provide a roof over nearly 100 million heads. That’s the population of Spain and Kenya combined.
To create this fund, World Bank’s arm, the International Finance Corporation (IFC) will put forth $200 million by subscribing to Masala bonds, rupee-denominated instru- ments, issued by HDFC and to be listed on the London Stock Exchange. HDFC will contribute the remaining $600 million from its own resources.
The affordable housing segment was given a shot in the arm by the government in Budget 2017 where it accorded the sector the status of infrastructure which gives developers tax holidays along with easier access to credit. Developers also have other financial benefit for operating in an infrastructure sector. The government also created two new middle-income categories under PMAY for urban areas.
One with an annual income between ₹6 and ₹12 lakh and the other between ₹12 and ₹18 lakh. Prime Minister Narendra Modi had announced earlier this year that loans of up to ₹9 lakh will receive an interest subsidy of 4% and loans of up to ₹12 lakh will receive a 3% subsidy.
But experts say that lack of credit for developers and low demand from homebuyers are the two issues plaguing the sector.
DEVELOPERS CAN BORROW FROM THE $800 MILLION FUND TO BUILD HOMES UNDER GOVT SCHEME