In the latest edition of The Euromoney Securitisation & Structured Finance Handbook 2014/15 (published by the Euromoney Handbooks, London) Sreya Ray & Vaibhav Anand of IFMR Capital have authored a chapter on the topic of Mortgage backed securitisation for affordable housing finance. In the chapter the authors provide a perspective on affordable housing finance and the challenges that it faces, along with an appraisal framework for AHFCs. In addition they detail a case study of IFMR Capital’s first ever mortgage backed securitisation for an AHFC.
Affordable Housing Finance Companies (AHFCs) in India have emerged as a small but fast-growing segment committed to addressing the credit gap in the mainstream financial system for low-income households seeking mortgage finance. These AHFCs have overcome the challenges in credit appraisal of undocumented cash flows of low-income borrowers through a deep and localised understanding of the informal economy and innovative models to evaluate the financial position and creditworthiness using non-traditional data points. Given this non-traditional approach to credit appraisal, these AHFCs face challenges in accessing debt that they can then on-lend to their potential borrowers. Access to capital markets via securitisation can be a very effective tool to provide efficient, reliable and sustainable sources of funds for AHFCs on a maturity matched basis, provided the legal complexities and risks of a mortgage-backed securitisation (MBS) can be adequately managed. IFMR Capital pioneered the first ever MBS for an AHFC, Hebros AHL IFMR Capital 2014, on March 27, 2014, leading the way for AHFCs to enter capital markets.