WB to give soft loan for low-cost housing

Project will be financed by credit from International Development Association

The World Bank will provide a $100-million soft loan to India to enable low-income households in urban areas to purchase, build or upgrade their houses.

The project, for which an agreement was signed between the multi-lateral agency and the finance ministry, would be implemented by the National Housing Bank, which would on-lend the money. It is aimed at incentivising lenders to focus on low-income households through a 200-300 basis point cut in the cost of funds for lenders, said a finance ministry statement. The project would be financed through the International Development Association, the World Bank’s concessionary lending arm.

About 90 per cent of the housing shortage in India is accounted for by low-income households. Last year, urban housing shortage was estimated at 19 million, said a World Bank statement.

“About 10 million people move to India’s towns and cities every year and need houses to live in,” said World Bank operations advisor Michael Haney, who signed the agreement on the low-cost housing project. A majority of these people were workers in the low-income, informal sector who found themselves shut out of formal financial markets when they sought loans for houses, he added. “They are forced to use unregulated, informal sources of finance at much higher rates of interest.”