Leading Middle East sovereign wealth fund ADIA (Abu Dhabi Investment Authority) has emerged as the front-runner to acquire a minority stake in affordable housing financier IIFL Home Finance as part of a value unlocking exercise initiated by the listed NBFC parent IIFL Finance
Canadian billionaire Prem Watsa-backed Fairfax Group and the UK government’s development finance institution CDC Group plc are key investors in IIFL Finance, a retail-oriented NBFC, holding 22.3 percent stake and 7.7 percent stake, respectively.
In January, HDFC Capital announced it had raised $1.8 billion from a consortium of investors led by ADIA for its third low-cost housing fund.
Last year, Multiples-backed Vastu Housing Finance Corporation raised about $200 million from a consortium of Norwest Venture Partners, Creation Investments and IIFL Asset Management. The deal is the largest private equity growth investment in the affordable housing segment in India, the announcement said. True North, Warburg Pincus and Partners Group are examples of other private equity funds which have placed bets in housing finance firms.
With over 2,563 branches, IIFL Finance and its subsidiaries, IIFL Home Finance Limited and Samasta Microfinance, are focussed on retail lending digitally. The product portfolio comprises home loans, gold loans, business loans including loan against property and unsecured MSME financing, microfinance, developer and construction finance and capital market finance.
IIFL Home Finance offers small-ticket loans for home purchase, renovation, construction and plot purchase to first time buyers and customers. Its ‘Swaraj’ home loans primarily cater to the housing needs of salaried, self-employed and professionals running micro-businesses across tier-I suburbs, tier-II and tier-III cities.
The firm’s AUM, as of March 31, 2021, stood at Rs 14, 440 crore with a growth of 16 percent Y-o-Y . The total disbursement during the year amounted to Rs 423 crore with the average ticket size of home loans reduced from Rs 30 lakh in FY16 to Rs 16 lakh in FY21.
The firm actively promotes the development of green affordable building in collaboration with housing developers and experts through the ‘Kutumb’ platform in a bid to reduce the carbon footprint and deliver cost-efficient structures.
The 2021 annual report of IIFL Finance says, “The affordable housing space exhibits the highest growth potential in the overall HFC (housing finance companies) portfolio. This can be accredited to the rising income levels and increasing financial penetration. SCBs (scheduled commercial banks) , along with HFCs (housing finance companies), are expected to cater the huge demand-supply gap in the affordable housing segment through co-lending.”
The report added, “On the demand side, the government’s motive to boost the real estate sector, driven by Pradhan Mantri Awas Yojana (Urban) (PMAY (U)) initiative is expected to provide good opportunities for HFCs.