The loan books of affordable housing finance companies in India have grown manifold in a span of five years, says the report by consulting firm

Mumbai: Despite a robust growth in demand for low cost homes, 90% of their supply in India is coming from small and informal developers. Several large and mid size builders still remain unsuccessful in providing homes to low income customers, said a report by consulting firm FSG and National Housing Bank (NHB).

The report ‘State of Low-income Housing Finance Market’ released on Wednesday by industry body Federation of Indian Chambers of Commerce and Industry (FICCI) said the loan books of affordable housing finance companies in India have grown manifold in a span of five years.

From a combined loan book of close to Rs1,000 crore in March 2013, it has shot up to over Rs27,000 crore at an average loan ticket size of Rs9.3 lakh and “facilitated the ownership of more than 230,000 affordable homes, the report said. 

According to Ashish Karamchand, managing director FSG, low income housing finance is expected to grow at 30-40% over the next five years. 

As per the report, 62% of the new housing finance is being used to fund self constructed standalone houses while 38% of financing from affordable housing finance companies (AHFCs) is taken up by low-income customers to “purchase apartments, often in areas with higher land costs, where self-construction is less affordable.”

The report pointed out that large and mid-sized formal developers have largely been “unsuccessful in supplying affordable housing to low-income customers” as projects tend to be more expensive and located further away from the city in less desirable locations. “These distant locations also may lack infrastructure and require large investments, which further shrink the already low margins of such projects,” the report said. 

While 1% of the low housing supply comes from large and branded developers, around 9% of the supply are built by mid-size and formal developers. The rest 90% of the supply came from small and informal developers who typically construct small projects on the outskirts of cities, like in the jurisdiction of Gram Panchayats.