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...

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Main Authors:	Karmali, Nadeem M., Guillermo J. Rodriguez Ruiz
Format:	Working Paper
Language:	English
Published:	Washington, DC: World Bank 2022
Subjects:	AFFORDABLE HOUSING AFFORDABLE HOUSING FINANCE COMPANIES MORTGAGES LENDING REAL ESTATE HOUSING MARKETS
Online Access:	http://documents.worldbank.org/curated/en/099731505092231210/IDU0d6d905ed0a3d704e5b0800c0f4741914254c http://hdl.handle.net/10986/37416

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spelling	okr-10986-374162022-05-14T05:10:41Z The Growth and Performance of Affordable Housing Finance Lenders in India Karmali, Nadeem M. Guillermo J. Rodriguez Ruiz AFFORDABLE HOUSING AFFORDABLE HOUSING FINANCE COMPANIES MORTGAGES LENDING REAL ESTATE HOUSING MARKETS 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. 2022-05-13T15:43:53Z 2022-05-13T15:43:53Z 2022-05-09 Working Paper http://documents.worldbank.org/curated/en/099731505092231210/IDU0d6d905ed0a3d704e5b0800c0f4741914254c http://hdl.handle.net/10986/37416 English CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank Washington, DC: World Bank Policy Research Working Paper Publications & Research India
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English
topic	AFFORDABLE HOUSING AFFORDABLE HOUSING FINANCE COMPANIES MORTGAGES LENDING REAL ESTATE HOUSING MARKETS
spellingShingle	AFFORDABLE HOUSING AFFORDABLE HOUSING FINANCE COMPANIES MORTGAGES LENDING REAL ESTATE HOUSING MARKETS Karmali, Nadeem M. Guillermo J. Rodriguez Ruiz The Growth and Performance of Affordable Housing Finance Lenders in India
geographic_facet	India
description	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.
format	Working Paper
author	Karmali, Nadeem M. Guillermo J. Rodriguez Ruiz
author_facet	Karmali, Nadeem M. Guillermo J. Rodriguez Ruiz
author_sort	Karmali, Nadeem M.
title	The Growth and Performance of Affordable Housing Finance Lenders in India
title_short	The Growth and Performance of Affordable Housing Finance Lenders in India
title_full	The Growth and Performance of Affordable Housing Finance Lenders in India
title_fullStr	The Growth and Performance of Affordable Housing Finance Lenders in India
title_full_unstemmed	The Growth and Performance of Affordable Housing Finance Lenders in India
title_sort	growth and performance of affordable housing finance lenders in india
publisher	Washington, DC: World Bank
publishDate	2022
url	http://documents.worldbank.org/curated/en/099731505092231210/IDU0d6d905ed0a3d704e5b0800c0f4741914254c http://hdl.handle.net/10986/37416
_version_	1764487134366924800

The Growth and Performance of Affordable Housing Finance Lenders in India

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