The Growth and Performance of Affordable Housing Finance Lenders in India
Anecdotal studies have highlighted the recent rapid growth of so-called affordable housing finance companies across India. These new lenders are reported to be using a high-touch approach common to microfinance to provide mortgages to households th...
| Main Authors: | , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
Washington, DC: World Bank
2022
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/099731505092231210/IDU0d6d905ed0a3d704e5b0800c0f4741914254c http://hdl.handle.net/10986/37416 |
| Summary: | Anecdotal studies have highlighted
the recent rapid growth of so-called affordable housing
finance companies across India. These new lenders are
reported to be using a high-touch approach common to
microfinance to provide mortgages to households that are
newer to credit, have irregular incomes, and live in smaller
urban centers. As there is no specific license type for
these lenders, this paper uses detailed credit bureau data
to identify which lenders could be tagged as affordable
housing finance companies. Using several classification
techniques, the paper then assesses their growth and
performance. The results vindicate the anecdotal studies and
show that this nascent sector grew at an average annual
compound growth rate of 27–32 percent between 2016 and 2020.
Affordable housing finance companies have been able to lend
to more marginalized borrowers who are newer to credit and
do so in a markedly different way than other lenders.
Delinquencies at affordable housing finance companies are
higher only for smaller loans, while risk-adjusted lending
spreads are higher for all affordable housing finance
company loan sizes. This suggests that, thus far, the
approach is profitable and sustainable. Looking forward,
this lending model could be useful for other countries to
explore given the incipient success in India, although there
are crucial capital market and institutional features that
are unique to India. The paper also discusses demand-side
subsidies for mortgages in India and identifies
opportunities to improve the targeting of the program. |
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