India Infrastructure Finance Company Ltd (IIFCL), renowned for financing large-scale infrastructure projects totaling INR 13.8 trillion in 2023-24, is now eyeing affordable housing. Facing challenges like slim profit margins and high financing costs, IIFCL aims to make affordable projects viable by offering competitive interest rates and fostering public-private partnerships. Discussions with states like Andhra Pradesh, Tamil Nadu, and Gujarat highlight potential collaborations. Experts see IIFCL's involvement as pivotal, potentially enhancing affordability through strategic financing and leveraging government-private synergies. With government incentives already in play, IIFCL's entry promises to boost housing availability and affordability across India.
The state-owned India Infrastructure Finance Company Ltd (IIFCL) is planning to enter this crucial segment, potentially providing a much-needed boost.
IIFCL, established in 2006, has traditionally focused on financing large infrastructure projects. They've financed projects with a total outlay reaching INR 13.8 trillion in 2023-24. However, they are now looking to leverage their expertise to support the development of affordable housing. Discussions are underway with several state governments, including Andhra Pradesh, Tamil Nadu, and Gujarat, to explore collaboration.
Affordable housing projects often face challenges due to limited profit margins for developers, difficulties in securing land, and the high cost of funds. Building affordable homes can be less profitable for private companies compared to luxury projects. Affordable housing often requires larger land parcels, which can be challenging for private builders to acquire. Financing affordable housing projects can be expensive due to traditional lending rates.
IIFCL's involvement offers several potential benefits. As a government-backed entity, IIFCL may offer more competitive interest rates for developers, making affordable projects more viable. They can also facilitate partnerships between public authorities and private developers. This would leverage government land resources and private expertise. For instance, some existing projects have a potential sale construction area of 50,000 square feet, highlighting the potential of such collaborations. Additionally, IIFCL's experience in managing large projects with a standalone portfolio reaching INR 51,017 crore in 2023-24 can be valuable in ensuring the smooth execution of affordable housing developments.
Real estate experts view IIFCL's entry as a positive development. Anuj Puri, chairman of Anarock Group, believes it can promote financial inclusion by making affordable housing projects more attractive for larger developers, especially considering the decline in budget home sales (priced under Rs 40 lakh) to about 20% in the first quarter of 2024. Sathish Kumar, chairman of the National Real Estate Development Council, Karnataka, highlights how IIFCL's involvement can address the issue of high financing costs in this sector.
The government's existing initiatives like tax breaks for developers and subsidies for homebuyers are positive steps. IIFCL's entry, coupled with these existing measures, has the potential to significantly improve the affordability and availability of housing for millions of Indians.
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