IFC (International Finance Corp) has confirmed an investment of Rs.130 crore equivalent to $20 million in Aavas Financiers Limited, which is based in Jaipur. IFC is also a World Bank Group member. The company was earlier known as Au Housing Finance Limited and was formed as a subsidiary of AU Financiers (India) Limited in the year 2011 in February. The objective was the provision of housing finance in semi-urban and rural zones.
In June, 2016, Au Financiers sold its stake in Au Housing to PE (private equity) investors Partners Group and Kedaara Capital Group. This was necessary for fulfilling the criteria of the Reserve Bank of India (RBI) for converting into a small finance bank.
Aavas Financiers will be using these funds for offering home loans in semi-urban and rural areas to low-income customers. These are customers who have limited access to mortgage finance or no access at all. The customers of Aavas Financiers include dairy supply chains, grocery merchants, garment traders, carpenters and salaried and self-employed workers employed in the unorganized sector and these people do not possess income proof more often than not.
Aavas will fill up this financing gap via its credit underwriting and assessment tools, which are proprietary. Larger institutions cannot cater to these sections of society on account of the absence of any credit history or high operational expenditure. According to the chief executive officer, Sushil Agarwal, a major gap is filled up by providing home loan access to customers who are employed in the informal sector. The investment from IFC will help the company widen its customer base according to Agarwal.
This investment is in sync with the IFC blueprint to boost accessibility as far as affordable home finance is concerned. The investment from IFC will aid Aavas in scaling up its reach for tapping underserved and un-served low-income customers across Maharashtra, Madhya Pradesh, Delhi-NCR, Gujarat and Rajasthan. IFC already has a presence in these regions through 111 branches and almost Rs.2,900 crore of assets under management. The new IFC investment in Aavas is one amongst a series of advisory engagements and investments that IFC has taken up in the affordable housing sector recently with the mission of contributing in the national objective of Housing for All by 2022 according to the country head at IFC, Jun Zhang.
According to IFC, the country presently requires the building of 11 million homes in the affordable housing category. Approximately 50 million people do not have access to proper housing facilities as per reports. IFC has already pumped in almost $300 million from the year 2010 in 6 housing finance companies and a mortgage guarantee company. IFC was also the founding investor for HDFC in the year 1978 for setting up the first retail housing finance private sector company in the country.