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IFC to invest up to $40 mn in Au Financiers’ housing finance arm

08 May, 2017

International Finance Corporation (IFC) plans to invest up to $40 million (Rs 257 crore) in housing finance company Aavas Financiers Ltd, as the World Bank’s private-sector investment arm seeks to deepen its bet on a segment that offers loans for low-cost houses.

Aavas Financiers is a unit of private equity firm Warburg Pincus-backed Au Financiers (India) Ltd. It will use the funds to offer loans for affordable housing to individuals from low- and medium-income groups in Rajasthan and five other states, IFC said in a statement.

The customers of Aavas Financiers, formerly known as Au Housing Finance, include dairy farmers, carpenters, garment traders and artisans, IFC said. Currently, almost 65% of Aavas Financiers’ customers are self-employed, it added.

Aavas Financiers is operating in six states, Rajasthan, Gujarat, Maharashtra, Madhya Pradesh, Delhi and Haryana through its network of 94 branches, according to its website.

In February last year, its parent Au Financiers had said that it agreed to sell Aavas Financiers to a joint venture of local private equity firm Kedaara Capital and Swiss investment firm Partners Group.

Meanwhile, Au Financiers has received approval from the Securities and Exchange Board of India for its initial public offering.

Au Financiers was one of 10 applicants to receive the Reserve Bank of India’s in-principle approval last year to start a small finance bank.

IFC’s affordable housing bets
Affordable housing has received a lot of attention thanks to the Narendra Modi government’s plan to provide housing for all Indians by 2022. In the budget for 2017-18, finance minister Arun Jaitley said he planned to accord the infrastructure status to affordable housing while expanding the scope of what constitutes such dwellings and also provided some capital gains taxation relief for sellers of real estate.

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 segment.

In April last year, IFC said it planned to invest up to $38 million in three housing finance companies — Aspire Home Finance Corporation, Micro Housing Finance Corporation and Aptus Value Housing Finance India Ltd.

In 2015, IFC agreed to invest $25 million 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 and PNB Housing Finance Ltd.

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IFC to invest up to $40 mn in Au Financiers’ housing finance arm

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