IFC, a member of the World Bank Group, has signed an agreement with Aavas Financiers — a retail, affordable housing finance company — and Aavas Foundation. The project will help improve access to affordable green housing for low-income borrowers.
The project is being supported by the UK-IFC Market Accelerator for Green Construction (MAGC) Program, a partnership between IFC and the Government of the United Kingdom, which aims to catalyze financing for certified green construction and green mortgages to mobilize investments that help tackle climate change.
“This program will help banks, financial institutions, and all other stockholders to promote Green Building initiatives of IFC,” said Sushil Kumar Agarwal, CEO and managing director of Aavas Financiers.
Around 600 million Indians are expected to live in urban areas by 2030 according to the United Nations. Women comprise 70 percent of the internal migration (2011 Census of India). Green buildings can save more than 20 percent on energy and water consumption compared to typical buildings, saving homeowners an average of 15-20 percent on utility bills.
In India, IFC estimates a residential green housing investment opportunity of $1.25 trillion from 2018 to 2030. However, there is still no scalable and replicable business case for financial institutions to offer a home loan product for beneficiary-led construction of green homes in the affordable segment.
The barriers to women’s access to housing finance are insufficient income and traditional gender norms according to an IFC report, Her Home – Housing Finance for Women. The government’s Credit Linked Subsidy Scheme provides a subsidized interest rate on housing loans if a woman will hold the title to the new property.
This project will help Aavas to conduct an exercise to establish a baseline for its women portfolio, and develop business projections for providing affordable green housing finance to women in low-income communities.
“IFC aims to increase the scale of green construction and mortgage finance — especially in the LIS (Low Income States) of India — by helping Aavas develop a strategy and business plan to effectively target the lower-income segment, including women borrowers,” said Jun Zhang, country head – India at IFC.