IFC plans to
support affordable housing in India — possibly housing in the Rs 5-7 lakh range
—by working at ground level with authorities and private sector players. It is
also working with National Housing Bank to set up a mortgage guarantee company,
IMGC India.
International
Finance Corporation (IFC), which has embarked on a major initiative in the
housing finance sector in India for the first time, for the investment arm of
WB, is looking at supporting mass housing and ‘truly affordable housing’.
Dovetailed with this initiative will be efforts to keep the housing projects it
supports in line with appropriate green building initiatives —
environment-friendly, energy, water and other resources-efficient structures —
that minimise the environmental impact of built-up space.
It plans to work with multiple agencies, including the authorities, and with
private sector players — though conditions apply. IFC will involve at various
levels, including regulatory, skill upgrading and financing, as a part of this
plan, reports Business Line.
In
a telephone interaction mediated by IFC officials in India, Prashant Kapoor,
senior industry specialist, IFC, Washington., who has specialised in the
affordable housing segment, outlined some of IFC’s plans to support the
affordable housing projects targeting the lower-middle and less-affluent
segments — possibly housing in the Rs 5-7 lakh range — where there is virtually
no supply, with the market focussed on the upper-middle and affluent segments.
IFC
is keen on supporting the private sector house builder, who is capable of
delivering value housing, rather than the run-of-the-mill developer who
speculates on the value of land, he cautions.
It
will bring in the expertise it has built up internationally, particularly in
economies in Latin America and South East Asia, where they have solved the
problem of affordable housing, despite high GDP growth rates that are driving
up costs.
They
have approached this by being ‘industrial in processing’ in real estate
development. Speed is the key as ‘cost increases with time’. They peg the gross
and net margins in advance, keep the project cycles short, use prefabricated
construction, and deliver the products in less than a year. The investment arm
of WB is working with the National Housing Bank on a report for addressing
affordable and environment-friendly housing.
IFC
will also address the regulatory side by working with the authorities concerned
on the mandatory minimum standards of efficiency. It has built up experience in
Indonesia and other countries, and is keen on bringing similar initiatives in
India and China.
As compared with the existing area of built-up space, the new supply will be
much bigger. “India is yet to be built” and this is the right time to
intervene, to ensure that the incoming supply is of the right kind, Kapoor
says.
IFC,
which has built up expertise in mass housing and green buildings, hopes to work
at the ground level, apart from Central Government institutions such as the
Bureau of Energy Efficiency.
While
IFC will work with agencies such as the Bureau of Energy Efficiency, its focus
will be more on working at the ground level with State-level agencies. It is
keen for ‘traction at the ground level’. State governments such as Rajasthan,
Gujarat and Tamil Nadu are moving in the right direction, and can benefit from
support in developing knowledge in human resources among the authorities.
It
is looking at a line of financing that lays emphasis on green housing. IFC is
talking to some developers in major cities to explore opportunities for direct
financing of projects.
During
the last two years, it has a taken a ‘systematic approach’ to this, and has
been monitoring developments in the markets here. It hopes to pursue this line,
and is in talks with leading developers and banks, including refinance
institutions and private banks and developers, according to Kapoor. IFC is
looking at basic standards — along the lines of the rainwater harvesting
initiative, solar water heaters for homes.
Typically,
in Colombia for instance, where the average income is approximately $200, more
than 20 per cent of the income goes to energy. If basic measures can help save
energy costs, at least 50 per cent, it would significantly add value to the
residents. There is a significant impact; it actually makes bank mortgages
safer.
Financial
instruments such as the ‘green mortgages’ are needed to support green
buildings. Further, it is partnering with the National Housing Bank to set up a
mortgage guarantee company, IMGC India.
According
to information available on the IFC website, this will be a Public-Private
Partnership between NHB, IFC, Asian Development Bank and an international
mortgage insurance holding company, Genworth Financial International Holdings,
a part of the US-based Genworth Financial, a financial services company.
IMGC
will provide credit risk coverage to residential mortgage lenders, to protect
them in case of borrower default. IFC will invest Rs 80 crore during the next
five years, to take up to 19 per cent equity stake in the company, to be headquartered
in NCR, Delhi.
Although IFC hasn’t invested in mortgage guarantee companies so far, IFC’s
experience in the housing finance sector and in general financial institution
building has helped in specific areas of project design, governance structures
and financial evaluation. IFC may also support IMGC through a programme of
counter-guarantees that would enable IMGC to expand its ability to support the
mortgage guarantee sector in a financially effective manner.
It will have a development impact in enabling home ownership for middle-income households and first-time buyers, and will enhance the financial market for housing finance and standardise lending practices.Source: www.realtyplusmag.com
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