NBFCs, PEs Get Interested In Affordable Housing Owing To Government Incentives

Affordable housing segment is attracting the interest of non-banking finance companies and large private equity firms as the government has offered so many incentives for this segment which includes fast approvals and infrastructure status.

Till now, the financing of affordable housing segment was done by funds from small developers who were categorically involved in affordable housing. The government has been encouraging the affordable housing segment to achieve the vision of Housing for All by 2022 and the inflow of money is an indicator of the awaiting success.

Many big firms, like Kotak Realty Fund that previously concentrated on mid-income housing projects, are now analyzing the affordable housing segment. They feel that this large market has a speedy turnaround but low margins. Builders involved with affordable housing segment also have the provision of reasonable sources of funds. And since the demand of houses in affordable housing is the highest, builders can concentrate on launching new projects in this segment.

Some investors are also of the view that a separate strategy has to be established by the private equity firms if they want to invest in affordable housing. When there is any surplus in the beginning, private equity fund can leave at periodic intervals and the builder can use financing lenders at a reasonable rate for construction when the project is in full swing.

The equity lovers are gaining confidence in the affordable housing segment and the entry of long term capital in the segment will prove to be beneficial.