Poor people in India looking to buy a home may face many obstacles, such as having no history of filing tax returns. Because traditional lenders are often unwilling to lend to customers in such situations, housing developers are partnering with microfinance institutions to provide mortgages to small shop owners, taxi driver, vegetable vendors and others who might earn around USD 200 per month.

A recent Knight Frank report titled, ‘Affordable Housing in India,’ said the affordable segment has a potential of being as large as Rs 300,000 crore in the next two years. This has led to several developers and even MFIs and Non Banking Financial Institutes (NBFCs) exploring opportunities here.

Mukesh Gandhi, financial director of MAS Financial Services, recently told the Economic Times: “We have already lent INR 10 crore (USD 2.2 million) to around 300 people over the past three months and should disburse around INR 70 crore (USD 15 million) by the end of the year. While the interest in retail lending is very high (over 27 percent per annum) due to operational costs, for the housing sector it is 12 – 14 percent,”

Additional Resources:

Economic Times article, November 14, 2009
http://economictimes.indiatimes.com/markets/real-estate/realty-trends/Affordable-housing-takes-wing-as-micro-finance-cos-step-in/articleshow/5228538.cms