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The US International Development Finance Corporation (DFC) has granted a $20 million long-term loan to Ummeed Housing Finance, a Gurgaon-based firm. This financial injection is aimed at bolstering housing opportunities for economically disadvantaged and middle-income groups. Ashutosh Sharma, the founder and managing director of Ummeed, has revealed that the DFC will extend this debt with a fixed interest rate of 4.25 percent over a 15-year term. He articulated that this DFC arrangement empowers them to provide extended-term credit to underserved populations, facilitating home purchases, construction, and extensions. Simultaneously, it allows them to diversify their liability portfolio while taking advantage of favourable interest rates.
The total cost of this borrowing, inclusive of hedging expenditures over five years, is estimated to range between 8 percent and 9 percent. The loan package incorporates a two-year moratorium period. Ummeed is poised to deploy the loan amount of Rs 160 crore in local currency within the upcoming three months. With these funds, the firm is planning to finance approximately 2,000 low-value mortgages. James Polan, Vice President of DFC's Office of Development Credit, emphasized the significance of the transaction, stating that it is a pivotal deal providing crucial financing to enhance access to affordable housing in India.
Affordable housing finance has gained substantial momentum in India and is expected to experience further expansion owing to urbanization, the burgeoning middle-class population, and unwavering government policy support. In anticipation of these growth opportunities, Ummeed is laying the groundwork for equity funding next year, engaging both existing and new investors. At present, Norwest Venture Partners, Morgan Stanley Private Equity Asia, Lightrock, and local investor CX Partners collectively hold a 74 percent stake in Ummeed Housing Finance. Ashutosh Sharma, the promoter, and other key employees hold the remaining shares.
Established in 2016, Ummeed Housing Finance specializes in the field of affordable housing, offering loans with an average size of approximately Rs 9 lakh. As of the end of August, the company had managed assets worth Rs 1355 crore, with plans to elevate this figure to Rs 1800 crore by the end of the current fiscal year. Sharma emphasized the strong advocacy for women's co-ownership of these loans and properties in their program. Furthermore, the company is strategizing to augment its branch network from the current count of 86 to 100 by the conclusion of the fiscal year. As of the end of FY23, a substantial 84 percent of Ummeed's branches were strategically located in tier 2 and smaller towns, aligning with the firm's vision for expansion.
Ummeed Housing Finance, registered with the National Housing Bank (NHB), is a professionally managed housing finance company. Their dedicated team provides home loans, business loans, and loans against property to lower- and middle-income Indian families in urban and semi-urban areas. Ummeed focuses on financing individuals with informal incomes, employing specialized income grids for eligibility. With 16,000+ customers and an AUM of INR 1,100 crore, Ummeed aims to enhance the customer experience using technology throughout the loan lifecycle.
The DFC is America's development finance institution, partnering with the private sector to address key challenges in the developing world. Their investments span various sectors, including energy, healthcare, infrastructure, and technology, with a focus on supporting small businesses and women entrepreneurs to stimulate job creation. DFC upholds high standards regarding the environment, human rights, and worker rights, enhancing America's leadership in global development and offering sustainable alternatives to state-directed initiatives.
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