Mumbai: International Finance Corp. (IFC), a member of the World Bank Group, on Monday announced that it will be investing $25 million in Mahindra Rural Housing Finance Ltd (MRHFL). The Mahindra and Mahindra Financial Services Ltd subsidiary plans to utilise the funds to offer small-ticket housing loans in rural areas.
“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,” Arun Kumar Sharma, chief investment officer at IFC said. Sharma further added that the investment into MRHFL will not only help in improving the living standards but also help generate jobs by giving the necessary push to housing construction industry.
As on 30 June, MRHFL’s outstanding loan book stood at Rs 7,083 crore with about 85% of its loan portfolio in the rural areas. For the April-June quarter, its net profit stood at Rs 31 crore. So, the company has extended loans to over 700,000 households across India.
“MRHFL is the pioneer of rural housing finance in India. Most of the housing finance in rural areas is for incremental construction or completion of homes and 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 MRHFL is around $1200. According to the 2011 Census, India has a housing shortage of 62.5 million units.To be sure, over 90% of the housing shortage is in low income categories.
Last month, IFC had invested $100 million in Mahindra Finance as well in order to allow the non-banking finance company to extend loans to individuals, farmers and small and medium enterprises in rural and semi-urban areas.