DHFL receives $85 million loan from IFC for low-cost, energy efficient housing
Dewan Housing Finance Corporation Limited (DHFL) has received an $ 85 million loan from IFC, a member of the World Bank Group, to expand finance for affordable and energy-efficient housing in India. The loan is being given with the support of the Government of Canada.
Of the total loan, IFC will provide $70 million through external commercial borrowing. IFC has committed an additional $15 million to finance green mortgages under the IFC-Canada Climate Change Program, made possible thanks to the Government of Canada’s instrumental contribution, which made the financing package viable. IFC is the implementing agency for the program. The loan to DHFL, to be used for green mortgages, will reduce 6,200 tons of carbon emissions per year. The terms of the loan include a tenure of 8 years on both tranches of the loan. DHFL has obtained a moratorium of 2 years and 3 years respectively on the two tranches of $70 million & $15 million, following which repayments will commence.
“While housing finance is one of the lowest risk asset classes in India, financial institutions have so far shown limited interest in the low income segment,” said Kapil Wadhawan, Chairman and managing director, DHFL. “IFC’s investment will demonstrate the viability of offering housing finance to low and middle income clients. IFC’s support to DHFL is a recognition of the company’s track record in serving this segment.”
The housing finance market in India has a huge gap to fill. According to India’s Twelfth Five Year Plan (2012-2017), the housing shortage in the country is estimated at 58.8 million units. Over 90 percent of this demand is from low-income households.
“Promoting housing finance is one of the key priority areas for IFC in India, especially in India’s low income states,” said Serge Devieux, IFC Director for South Asia. “By demonstrating the benefit of green homes, the project is expected to help home buyers in low and middle income segments buy affordable energy-efficient homes.”
IFC has a long-term partnership with DHFL over the last decade. In 2003, IFC provided a loan of around $12.5 million to the company. IFC also co-invested in Aadhar Housing Finance, a company jointly promoted by DHFL Group and IFC, which provides affordable home loans to low income borrowers.