IFC may invest $60M in Tata Capital Housing via NCDs

International Finance Corporation (IFC), the private-sector investment arm of the World Bank Group, may invest $60 million (Rs 400 crore) in Tata Capital Housing Finance Ltd (TCHFL) to help it expand its mortgage lending business in smaller cities and towns in the country.

The investment would be through non-convertible debentures (NCDs) in one or more tranches with a tenure of five years, IFC said in a disclosure note.

TCHFL is a wholly owned subsidiary of Tata Capital Ltd, part of the diversified Tata Group. It received a permit to operate as a housing finance company in 2009.

The company offers housing loans and loans against property to individual borrowers and project finance loans to developers. It intends to expand lending in the affordable housing segment, the IFC note said.

India’s housing finance market is growing fast even as sales of new residential properties have been slow. The market largely caters to second-hand property purchases. Housing finance companies have been particularly successful compared to banks in mortgage lending due to quicker turnaround time, flexible product structuring and wider reach.

IFC has backed several housing finance companies in the past including Dewan Housing Finance and AU Housing Finance. Earlier this week, it said  it will provide up to $75 million to PNB Housing Finance Ltd via five-year NCDs. PNB Housing is jointly owned by PE firm Carlyle and state-run Punjab National Bank.

Meanwhile, IFC’s proposed investment marks an expansion of business engagement with Tata Group in the affordable housing segment.

In May, IFC said  it will invest $25 million (Rs 160 crore then) in the affordable housing arm of privately held developer Tata Housing Development Company Ltd. The investment will go to finance affordable housing projects for low-income households across India under Tata Value Homes, a 100 per cent subsidiary of Tata Housing.

The funding will work as longer-term capital for the developer to build about 16,800 homes over 10 years.

In July, civil construction and real estate major Shapoorji Pallonji & Company Ltd formed  a joint venture platform with Standard Chartered Private Equity, IFC, and Asian Development Bank to develop affordable housing in India.

This platform has a commitment of $200 million. It will look to develop about 20 million sq ft of affordable housing units spanning cities such as Mumbai, Pune, Delhi NCR, Chennai, Kolkata, Bangalore and Ahmedabad over eight years.

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