46197 - Aadhar Debt

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Summary of Investment Information

Project Number

46197

Company Name

AADHAR HOUSING FINANCE LIMITED

Date SPI Disclosed

Apr 27, 2022

Country

India

Region

South Asia

Projected Board Date

May 30, 2022

Environmental Category

FI-3 - No Impact

Status

Active

Last Updated Date

Jul 17, 2022

Department

Regional Industry - FIG Asia & Pac

Industry

Financial Markets

Previous Events

Approved : Jun 6, 2022
Signed : Jun 29, 2022
Invested : Jul 15, 2022

Sector

Primary Mortgage Institutions

Additional Project Attributes

Blended Finance

Project Description

The proposed IFC investment comprises an up to 7-year senior debt investment of up to US$90 million in Aadhar Housing Finance Limited (Aadhar). The proceeds will be utilized to extend financing to retail buyers of affordable/green affordable housing units. The Project is expected to provide counter-cyclical support for the housing needs of lower income groups, who have been severely impacted by the disruptions caused by COVID-19, as well as support green housing, which is still underdeveloped in India, particularly in the affordable segment. Subject to internal approvals, the Project may receive support from the Market Accelerator for Green Construction (“MAGC”) Program as discussed in the Blended Finance Section.

Associated Advisory Engagement

IFC Advisory Services has partnered with Aadhar for a proposed engagement aimed towards sharing technical knowledge, building the company’s capacity to evaluate green housing opportunities, certification tool (EDGE) and reporting of green affordable housing. The engagement will help the firm develop and test its Green Affordable Housing value proposition in the self-construction segment and create a roadmap for launching this proposition full scale.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	90.37
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

Stakeholder Impact: Improved access to affordable housing finance: Rapid urbanization and the lack of affordable housing finance has led to a severe shortage of housing units in urban areas. Recent estimates suggest India’s urban housing shortage was 29 million units in 2018, increasing by over 58 percent since 2012. The rural housing shortage also continues to be a concern and is estimated to be twice that of the urban housing shortage as the rural segment is less attractive to private sector developers. Housing financiers have been reluctant to finance the affordable segment due to the difficulties in assessing the debt servicing capacities of low- and middle-income group borrowers and the high costs of servicing such loans. IFC anticipates that this Project will significantly increase retail borrowers’ access to housing finance and encourage homeownership for EWS & LIG segments. India's mortgage market depth (outstanding mortgage as % of GDP) is low compared to other emerging economies. Through this Project, and IFC’s previous investments, IFC has been supporting the Government of India’s initiative of “Housing for All”. Increased access to green affordable housing finance: Limited penetration of green housing is another key challenge in the housing market in India. IFC estimates a total green buildings and housing investment opportunity of US$1.4 trillion in India from 2018 to 2030, with the residential sector accounting for US$1.25 trillion (89 percent) of this opportunity. In addition to increasing access to affordable housing finance, the Project will also support Aadhar in growing its green affordable housing portfolio. Market Impact: Competitiveness: The housing market in India is very active, however, a large proportion of the housing finance focuses on high-income or salaried groups, and low & middle-income groups remain unserved/underserved. In the context of green financing, the market for green affordable housing finance remains underdeveloped with a very few HFCs/ financial institutions focused on financing for green building/housing as green finance is considered expensive and thus not meant for the affordable housing segment. IFC’s support through the project will promote greater competitiveness in the green affordable housing segment, by demonstrating the viability of providing such financing to lower income segments.

IFC will provide both financial and non-financial additionality through this project. Financial additionality will be provided in the form of longer-term financing structure, which is much needed by HFCs in India, who are facing challenge in matching their assets and liabilities maturities due to longer tenor of their assets and limited availability of longer tenor funding in the market. With respect to non-financial additionality, IFC will support Aadhar to build its internal capacity to identify, promote, and manage certified green building investments.

E&S Category Rationale / Risks and Mitigation

The project entails a senior loan of up to US$ 90 million to Aadhar Housing Finance Limited for financing retail buyers of affordable/green affordable housing units in India. The company primarily provides retail lending to salaried and self-employed individuals for purchase, construction, renovation, and extension of residential and non-residential property. The use of proceeds will be only for on lending to individual borrowers for purchase, construction, renovation, and extension of residential property units and will not be used for any builder/construction finance or towards non-residential property. Hence, the proposed project presents no adverse environmental or social risks or impacts and is categorized as FI-3 in accordance with IFC's Environmental and Social Sustainability Policy. The proceeds will not be used to support any coal-related activities or higher risk business activities that may include significant Occupational Health and Safety risks or impacts on the environment, community health and safety, biodiversity, cultural heritage, involuntary resettlement or risk of adverse impacts on Indigenous Peoples. Aadhar had been an investment client of IFC in the past and it had a satisfactory E&S performance. Aadhar has adequate HR policies which are in line with IFC Performance Standard - 2 requirements and follows the applicable Life and Fire Safety requirements.

Contacts

For Inquiries About the Project, Contact

Aadhar Housing Finance Ltd
Mr. Anmol Gupta
Chief Treasury Officer
022-41689940
anmol.gupta@aadharhousing.com
802, Natraj by Rustomjee, W.E. Highway and Sir MV Road Junction, Andheri East, Mumbai – 400 069, India
www.aadharhousing.com

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