IIFL Home Finance is poised to boost its green housing portfolio to 5,000 crore INR in the next three years, doubling its current value. A technical team has been established to educate developers on constructing green projects. Currently, green housing loans constitute less than 10% of IIFL's loan book, with 70% being individual loans for buyers in green-certified projects. In August 2023, the International Finance Corporation (IFC) invested up to USD 100 million in IIFL, part of which is earmarked for financing green housing. This expansion aligns with India's push for sustainable development and housing accessibility, positioning IIFL as a leader in eco-friendly, affordable housing solutions.
IIFL Home Finance aims to increase its green housing portfolio to INR 5,000 crore over the next three years, up from the current INR 2,000 crore. To achieve this, the company has set up a technical team to educate developers about building green projects. Currently, green housing loans make up less than 10% of IIFL's total loan book. Around 70% of this portfolio consists of individual loans for buyers in green-certified projects, while 30% is construction financing.
In August 2023, the International Finance Corporation (IFC) invested up to USD 100 million in IIFL Home Finance, and a part of this is to be used to finance green housing for buyers in this underserved segment. The remaining 50% of the funds would be used for granting affordable housing loans to women borrowers. Ratra mentioned that they recently started self-construction loans in partnership with IFC and expect this segment to grow in the current year.
IIFL Finance owns 80% of the housing finance firm, with the remaining 20% held by Abu Dhabi Investment Authority (ADIA). Total assets under management stand at around INR 35,000 crore, with home loans accounting for 80% of the overall portfolio. It specifically focuses on the affordable category, where the ticket size is less than INR 20 lakh. It has 390 branches across India.
Going forward, annual asset growth is projected at 20-22%. The company plans to add 30-40 new branches each year. It aims to maintain a return on assets above 4% and increase return on equity to over 20% from the current 17%. For 2024-25, IIFL plans to borrow around INR 12,000 crore to meet its loan growth target. These borrowings will be a mix of non-convertible debentures, refinance and term loans.
The construction industry is one of the largest consumers of non-renewable resources. Even after completion, most buildings continue emitting huge amounts of carbon dioxide. Buildings in India already account for over 30% of the country's electricity usage. Moreover, two-thirds of the buildings expected to exist in India by 2030 are yet to be constructed. Thus, there is significant potential to reduce the environmental consequences. This underscores the importance of green construction. For a large economy like India, where 'housing for all' is a social priority, green housing at scale will create substantial social impact.
To quantify the benefits, green construction has potential to reduce global CO2 emission by as much as 84 gigatonnes by 2050. Green buildings use 40-50% less resources than traditional buildings. They make optimum use of resources, save water, reduce operating cost of building and also do social justice with site workers.
Worldwide there are many agencies which give green ratings to buildings. In India, two major agencies involved in green ratings are Indian Green Building Council (IGBC), and Green Rating for Integrated Habitat Assessment (GRIHA).
As the construction sector looks to reduce its environmental impact, initiatives like IIFL Home Finance's expansion into green housing can make significant progress towards goals like carbon reduction and sustainable development. By collaborating with experts in green building standards and certification, IIFL is well positioned to grow the availability of affordable, eco-friendly homes in India. This aligns with the country's need for housing accessibility while also establishing leadership in sustainable construction practices of the future.
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