Tiny Loans for Tiny Homes – India Real Time – WSJ

From what began as a small experiment helping slum dwellers buy homes in Mumbai, Micro Housing Finance Corporation Ltd. has grown into a multi-million dollar business making loans across the country.

The Mumbai-based company, which gives low-income households loans to buy homes, now operates in more than 15 cities, with Coimbatore, in the southern state of Tamil Nadu, being the most recent addition just last month.

“Housing finance companies focus on serving the top 3% to 5% of the population because it’s easier and cheaper,” to give big loans to rich people, said Madhusudhan Menon, chairman of Micro Housing Finance. “No one wants [low income] customers who don’t have documentation of their income.”

The lack of home loans to those most in need of them is one of the main reasons more than 90% of India’s acute housing shortage of around 19 million units falls on the urban poor, according to a report released by real-estate consultancy Jones Lang LaSalle.

For most of the urban poor, owning an apartment with reliable electricity or even a water connection is out of reach even if they have a regular income because banks refuse to give the poor housing loans.

More than 41% of the population of the megacity of Mumbai lives in slums, defined as residential areas unfit for human habitation due to dilapidation, over-crowding, poor ventilation and lack of sanitation facilities, according to government estimates. That figure could be brought down sharply if builders constructed affordable housing for the city’s hardworking poor and housing finance companies gave them long-term home loans.

via Tiny Loans for Tiny Homes – India Real Time – WSJ.

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