By Latest News
In a move that might give a fillip to affordable-housing finance projects, state-owned India Infrastructure Finance Company Ltd (IIFCL) is planning to enter this real estate segment. “So far, we have not been involved in affordable housing financing. However, we aim to enter this segment soon,” said a top IIFCL official who did not wish to be named.
A wholly owned Union government company established in 2006, IIFCL provides long-term financial assistance to viable infrastructure projects. Since September 2013, it has been under the regulatory provision of the Reserve Bank of India (RBI) as a registered non-deposit-taking non-banking financial company.
The official quoted above said the company was in discussions with several state governments, including Andhra Pradesh, Tamil Nadu, Manipur, Gujarat, Meghalaya, and Odisha, as well as housing and urban development departments across states.
Anuj Puri, chairman of real estate consulting firm Anarock Group, said the potential for affordable housing infrastructure financing in India, supported by government initiatives, was aimed at financial inclusion. “Developers have traditionally been cautious about affordable housing projects due to narrow profit margins. The upcoming Budget is expected to make this segment more attractive for larger players with robust execution capabilities,” Puri said.
According to Anarock Research data, sales in the budget homes category (priced under Rs 40 lakh) declined to about 20 per cent in the first quarter of 2024 from over 38 per cent before the pandemic in 2019.
Sathish Kumar, chairman of the National Real Estate Development Council, Karnataka, pointed out that affordable housing often lacked attractiveness for builders. “The issue primarily stems from the cost of funds, which are insufficient for affordable housing projects. Additionally, affordable housing requires secure land allotment, which is not typically within the purview of private builders. Therefore, the entry of IIFCL into this segment could be a positive development,” Kumar said.
Vikas Tomar, executive president & business head of online real estate firm Square Yards, highlighted the government’s focus on incentivising affordable housing through measures like interest subsidies under the Credit-Linked Subsidy Scheme, tax benefits for developers, and infrastructure status for affordable housing projects, which streamline funding access.
“Return on investment in affordable housing projects can be quite attractive due to high demand and favourable government incentives like tax benefits and subsidies. Financing for affordable housing can be structured using various mechanisms, including government grants, subsidies, PPPs, and low-cost financing options, which significantly enhance project viability and returns,” Tomar said.
IIFCL’s standalone net profit increased by 44 per cent to Rs 1,552 crore in 2023-24, driven by increased lending and improved asset quality. The company financed 760 projects with a total outlay of Rs 13.8 trillion during the year. Its standalone portfolio grew 21 per cent year-on-year to Rs 51,017 crore in 2023-24. As of March 2024, IIFCL’s gross non-performing asset ratio declined significantly to 1.61 per cent from 4.76 per cent the previous year and 19.70 per cent as of March 2020.
First Published: Jun 27 2024 | 12:10 AM IST