IL&FS to foray into affordable housing business

MUMBAI: IL&FS Group, known for infrastructure development and financial services, is venturing into affordable housing business with three projects in Hyderabad, Chennai and Ahmedabad. The company has set up a separate subsidiary called IL&FS Townships and Urban Assets to undertake this business, said a top company official.

In addition to executing projects independently, IL&FS Townships and Urban Assets will be forming joint ventures and participate in public-private partnership projects initiated by the government. Under this venture, the company will be focusing on building affordable residences, economic activity to support job creation and livelihood around the project’s location, and providing services to upgrade lifestyle.

“Formalization of housing presents a huge opportunity for private players in India. We have put together a plan for affordable residences that addresses the need for housing by keeping in mind the limited ability of people to pay, individual aspirations for a better lifestyle and potential avenues for livelihood within the ecosystem,” Hari Sankaran, vice chairman & managing director, IL&FS, told ET.

IL&FS will be launching its first smart homes project in GIFT City, Gandhinagar, Gujarat, and the company is looking to build 1,000 such homes in the first phase of development by 2020, and thereafter rapidly scale the model across the country.

“The vision is to deliver 1 million homes over a 10 year period,” Sankaran said.

The group proposes to implement affordable housing projects on land that is already in its possession and is suitable for this initiative based on proximity to the city, the connectivity to places of work and geo-physical contours. Around 40 acres of land has been allocated for this initiative in three locations of GIFT in Gujarat, Hyderabad and Chennai.

The group is looking to use construction finance and funds infusion by private equity firms to support the venture apart from customer advances.

According to Sankaran, the funding required would be largely in the nature of working capital for which the group has adequate access to lines of credit. The peak working capital requirement of any one of these projects is expected to be more than Rs 125 crore and around Rs 60 to 70 crore on an average.

“Private equity investors would find this opportunity attractive once the model has been established and proven,” he said.

According to various estimates, there’s a gap of around 18 million urban housing units in the low and mid-income category by 2022 across tier 1, 2 and 3 cities across the country.

Affordable housing has been attracting lot of attention from realty developers and financiers over the past few quarters and the pace of development is getting faster. The government’s decision to grant infrastructure status to affordable housing in the 2017 Union Budget has rejuvenated the interest in this segment in a significant way. The move is allowing developers of these projects get access to institutional funding with better terms.economictimes

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