IFC to invest up to $40M in Repco Home Finance

International Finance Corporation (IFC) will invest up to Rs 266 crore ($40 million) in Repco Home Finance Ltd as part of its plan to support mortgage lenders that offer loans for low-cost houses.

The World Bank’s private-sector arm said in a disclosure that it will invest in the housing finance company through non-convertible debentures.

This comes after IFC said last month it would invest $38 million in three housing finance companies in India—Aspire Home Finance Corporation, Micro Housing Finance Corporation and Aptus Value Housing Finance India Ltd.

IFC said its investment in Repco will help the lender expand its reach especially in the low Tier II and Tier III cities in states outside southern India. Repco will use the funds for lending to retail borrowers for purchase, construction or improvement of individual houses.

As of April 2015, Mumbai-listed Repco operated through 106 branches and 36 satellite centres in Tamil Nadu, Andhra Pradesh, Telangana, Jharkhand, Kerala, Karnataka, Maharashtra, Madhya Pradesh, Gujarat, Odisha, West Bengal and Puducherry.

Repco was earlier backed by private equity firms Wolfensohn Capital Partners, Carlyle Group and Creador. Wolfensohn fully exited Repco in early 2014, followed by Carlyle in July 2014 and Creador a few months later.

Affordable housing has received a lot of attention on the back of the Narendra Modi government's plan to provide housing for all Indians by 2022. In the budget for 2016-17, finance minister Arun Jaitley proposed complete tax deduction on profits from housing projects with flats measuring 30 sq metres in metros and 60 sq metres in other cities.

Mainstream private equity investors have stayed away from affordable housing citing thin margins as the reason. However, IFC and a couple of impact investors have clinched deals in this space.

In 2015, IFC agreed to invest $25 million (Rs 160 crore) in the affordable housing arm of Tata Housing Development Company Ltd. IFC has also backed several other mortgage lenders in the past including Dewan Housing Finance, AU Housing Finance and PNB Housing Finance Ltd.

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