36345 - Tata Housing

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Summary of Investment Information

Project Number

36345

Company Name

TATA CAPITAL HOUSING FINANCE LIMITED

Date SPI Disclosed

Nov 25, 2015

Country

India

Region

South Asia

Projected Board Date

Jan 8, 2016

Environmental Category

FI-3 - No Impact

Status

Completed

Last Updated Date

Jan 6, 2022

Department

Regional Industry - FIG Asia & Pac

Industry

Financial Markets

Previous Events

Approved : May 13, 2016
Signed : May 31, 2016
Invested : Dec 28, 2016

Sector

Primary Mortgage Institutions

Project Description

Tata Capital Housing Finance Limited (“Company” or “TCHFL”), is a wholly owned subsidiary of Tata Capital Limited (“TCL”), and is registered with National Housing Bank (“NHB”) to carry on housing finance activities. The Company offers a range of Housing Loans and Loans against Property to various segments of society viz. salaried individuals, self-employed individuals, self-employed professionals, non-individual entities, etc. and has been focusing on business opportunities available within the Tata ecosystem. The housing finance market in India is growing fast and is served by multiple institutions that cater to people in diverse geographies and across income spreads. Mortgage lending has significantly contributed to the growth in housing construction and housing consumption activities.

Apart from Housing Loans and Loans against Property to the retail segment, TCHFL also provides project finance loans to developers. The Company intends to keep growing its business at a healthy rate with Rural and Affordable Housing Finance, as one of its focus areas.

TCHFL received its certificate of registration from the NHB, to commence business as a housing finance company in 2009. TCHFL has identified affordable housing as a core growth area. TCHFL will benefit from pan India reach and presence of Tata Capital companies. TCHFL is targeting Tier 2 and Tier 3 cities and rural areas. HFCs continue to compete successfully vis a vis Banks due to their better turnaround time and superior product structuring, service orientation, and better reach, especially for the underserved segments.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	61.51
Equity

IFC's loan to the financial institution described in this SII is targeted for on-lending to the following sector(s):

Product Type	Use of Proceeds
Straight Senior Loan	Housing Finance

IFC's Definitions of Targeted Sectors can be found here.

Development Impact

1.Additional Reach: Tata Capital HF''s strategy is to expand its affordable housing portfolio across India, for which they have a unique ability to penetrate thanks to the strong Tata brand.
2. Pan-Indian Presence: Tata Capital HF is the appropriate partner for IFC to provide financing to under-served segment of the market as the Company is present all across India.
3. Cross- selling products: Tata Capital HF gives the opportunity to cross-sell services of the other group companies. In addition TCL is considering an affordable housing fund to invest in developers of affordable housing projects and has invited IFC to play a lead role in the structuring and design of the Fund and to act as an anchor investor. IFC will evaluate this opportunity on its own merits but it provides an example of the potential synergies that IFC can benefit from through its collaboration with TCL as it seeks to make a major impact in the housing finance area.

1. Broadening IFC''s Strategic Relationship with Tata Capital Limited (parent of Tata Capital HF): The Project broadens the strategic relationship with Tata Capital Limited (TCL). IFC has two joint ventures with TCL, Tata Cleantech Capital and ICML Limited. Tata Cleantech Capital is the first green field environment finance company in emerging markets. It is in the process of being converted into a specialized infrastructure finance company to take advantage of the broader opportunities that are emerging in anticipation of the reforms to address operational constraints in the development of infrastructure projects in India. ICML, which was a specialized collections company, ran into issues due to the issues created by the technical partner, Capital Services. ICML is now being wound up after a challenging resolution process. The collaboration provided by TCL to IFC through this difficult period has been nothing short of exemplary, and is a testimony of an excellent relationship with IFC. Tata Capital and IFC continue to look for other interesting and mutually beneficial joint opportunities including in the payments space.
2. Most NBFCs are reliant to large extent on bank borrowings. IFC''s investment would allow Tata Capital HF to meet its funding requirements from a diversified source and assist in reducing bank borrowings. TCL is very keen to have IFC as an investor in NCDs as it is an important market signal.
3. Development Focus: IFC is encouraging Tata Capital HF to increase its focus on the lower ends of the market by making the financing conditional upon its delivery to the smaller towns and cities and to the affordable housing segment. Tata Housing, another group company is actively exploring a major expansion in housing construction investments in the affordable housing sector and this project will give the IFC an opportunity to explore synergies between the availability of housing finance and improvement in the supply of good quality affordable housing both of which are essential to address the enormous housing shortage that confronts the affordable housing segment in India.

E&S Category Rationale / Risks and Mitigation

The company is primarily engaged in retail housing loans to individuals. It additionally provides loan against property to self-employed and salaried professionals and construction finance loans to builders for residential projects. The proceeds from this NCD issue will be used only for on lending to borrowers for purchasing residential homes and will not be used for any builder/construction finance. Hence, the project will have negligible environmental or social risks or impacts and therefore the project is categorized as FI-3. There will be no E&S requirements for the project.

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