IFC to invest US$25mn in Tata Value Homes

IFC, a member of the World Bank Group, has announced its intention to invest US$25mn alongside Tata Value Homes, a 100 percent subsidiary of the Mumbai-based developer Tata Housing, to fund the much-needed affordable housing projects for low-income households across the country.

According to company sources, the project aims to help reduce India's increasing shortage of homes catering to buyers in this segment by providing Tata Value Homes with long-term capital to build an estimated 16,800 affordable homes over the next decade.

Elaborating further Brotin Banerjee, CEO and MD, Tata Housing said, "Our partnership with IFC will help increase the availability of affordable, value-housing in India. We strongly believe that owning a home is often a catalyst for people to improve their lives.

"Over the past few years, we have delivered over 5,000 apartments in the price range of US$8,000 - 50,000 (INR 5,00,000 - 30 lakhs approx) across various townships. This partnership with IFC will help us become India's largest home provider in the value and affordable housing segment by 2018-19," he added.

The growing shortage of adequate housing units has mushroomed into a major challenge today for most emerging markets. In India, even as several factors such as increased urbanisation, higher levels of disposable incomes and an ever-increasing population have ensured a steady increase in the demand for quality housing, the country continues to grapple with an estimated shortfall of approx 19mn housing units with a majority being in under-serviced urban areas.

Curiously enough inspite of this obvious shortfall in affordable housing units, a majority of private developers across the country have persisted with developing homes in the premium and luxury residential segments only citing the high transaction costs incurred in mass housing projects.

A ploy that has subsequently backfired with a majority of them now saddled with a huge inventory of unsold homes pegged collectively at about 6.88 lakh units (for the quarter ended March) courtesy a sluggish market, high property prices and negative buyer sentiments.

According to real estate rating company Liases Foras, unsold realty inventory in the NCR region alone is expected to take about 71 months to clear, while Mumbai is currently sitting on about 46 months of housing stock sans buyers. These numbers are expected to rise further given the fact that no significant change in market sentiments is expected in the near term with a majority of buyers waiting in hope for a correction in prices.

This growing pile of unsold homes is in stark contrast with the larger fact that India needs about 18 million new homes in its cities, according to the Economic Survey released by the finance ministry in February.

According to Vipul Prakash, director, Global Corporate Coverage, IFC, it is this very disparity that the company hopes to rectify via its fund infusion into Tata Value Homes. Says he,"Our investment into Tata Value Homes will help lower and middle-income households and young professionals in urban and semi-urban areas access quality, affordable housing. IFC's investment is the first step towards a longer-term partnership to facilitate the development of affordable housing in India and other emerging markets."

Established in 2010, Tata Value Homes focuses exclusively on value and affordable housing and has introduced two pan-India brands - Shubh Griha for value homes and New Haven for affordable homes. Some of the company’s key ongoing projects include: Shubh Griha at Boisar (near Mumbai) and Ahmedabad, and New Haven also at Boisar, Ahmedabad and Bengaluru.