Affordable Housing Finance: A Strong Case for India Shelter Finance

Housing Society Law

Posted by Aditya Pratap Law Offices on 01 Mar 24

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India is witnessing a significant rise in its urban population, fuelled by economic growth and migration. This urbanization has created a substantial demand for affordable housing, particularly among the middle class and low-income segments. Addressing this demand requires innovative financial solutions and dedicated institutions like India Shelter Finance (ISF).

The Indian government has recognized the need for affordable housing and implemented various initiatives to bridge the gap. These initiatives include the Pradhan Mantri Awas Yojana (PMAY), which aims to provide affordable housing to all by 2022. Additionally, the government has taken steps to incentivize the housing finance industry, including tax breaks and interest rate subventions.

India Shelter Finance: A Key Player

India Shelter Finance (ISF) is a leading player in the Indian affordable housing finance sector. Established in 1999, ISF provides a range of housing finance solutions to individuals and developers, with a focus on the affordable housing segment.

Strengths of ISF:                          

Strong track record: ISF has a proven track record of success, with a consistent growth in its loan book and profitability.

Focus on affordable housing: ISF is dedicated to providing affordable housing finance solutions, aligning itself with the national agenda.

Wide reach: ISF has a wide network of branches and partners across India, enabling it to reach a large number of borrowers.

Technology-driven: ISF leverages technology to streamline its operations and improve customer experience.


Delving Deeper into the Legal Landscape:

The legal framework governing affordable housing finance in India is a complex tapestry woven from several key pieces of legislation. These include:

National Housing Bank Act, 1987: This act establishes the National Housing Bank (NHB) as the apex institution for housing finance in India. The NHB plays a crucial role in promoting and regulating the housing finance sector, including affordable housing finance, through various initiatives and policies.

Section 3: Establishment of the National Housing Bank (NHB): This section establishes the NHB as the apex institution for promoting housing finance in India. This has a direct impact on ISF, as the NHB provides crucial support through refinance facilities, policy initiatives, and regulatory oversight.

Functions of the NHB: This section outlines the NHB’s functions, including:

(ii) Providing financial and other support to housing finance institutions: This empowers the NHB to support institutions like ISF through various financial instruments and technical assistance, facilitating their growth in the affordable housing sector.

(vii) Promoting research and development in housing finance: This fosters innovation and the development of new products and services catering to the affordable housing market, which benefits ISF as it can adopt these advancements to improve its offerings.

Housing Development Finance Corporation Act, 1974: This act establishes the Housing Development Finance Corporation (HDFC), a leading housing finance institution in India. The HDFC has been instrumental in developing and shaping the housing finance market, including affordable housing finance, through its pioneering efforts and innovative solutions.

Credit Guarantee Fund for Low Income Housing Scheme (CLSS): Launched by the Government of India, this scheme provides guarantees to lenders offering housing loans to low-income families. This significantly boosts the availability of affordable housing finance and mitigates risk for lenders like ISF, fostering greater accessibility for a wider segment of the population.

Pradhan Mantri Awas Yojana (PMAY): This flagship scheme, launched by the Government of India, has a grand vision of providing affordable housing to all by 2022. The PMAY offers various subsidies and incentives to developers and homebuyers, making it easier for them to access and invest in affordable housing. This government initiative provides a powerful tailwind for ISF’s growth, as the demand for affordable housing is directly fuelled by such schemes.

Specific Provisions Driving ISF’s Growth:

The aforementioned legal framework contains several provisions that directly or indirectly empower ISF’s operations and pave the way for future growth:

NHB refinance facilities: ISF can leverage the NHB’s refinance facilities to access funds at lower interest rates. This allows ISF to offer housing loans to borrowers at more competitive rates, increasing its market competitiveness and attracting a wider pool of potential borrowers.

CLSS credit guarantee: This scheme allows ISF to expand its reach and cater to a broader segment of the population, particularly low-income families, with minimal risk. This fosters financial inclusion and aligns ISF’s mission with the government’s vision of providing affordable housing to all.

PMAY incentives: ISF can benefit from various incentives offered under the PMAY scheme, such as interest rate subventions, subsidies on land costs, and tax benefits. These incentives significantly reduce the overall cost of housing for borrowers, making ISF’s offerings even more attractive and fuelling demand for its services.

Regulatory framework for microfinance institutions (MFIs): As an MFI, ISF operates within a stable and enabling environment established by the Reserve Bank of India (RBI). This framework fosters transparency, accountability, and prudent lending practices, ensuring the long-term sustainability and stability of ISF’s operations.

Securitization of loan assets: ISF has the flexibility to securitize its loan assets to raise additional capital. This allows ISF to expand its lending portfolio and increase its reach in the affordable housing market, facilitating greater financial inclusion and contributing to the overall growth of the sector.

Challenges and Opportunities:


Competition: The affordable housing finance sector is becoming increasingly competitive, with several players vying for market share.

Rising interest rates: Rising interest rates could lead to an increase in loan defaults and impact ISF’s profitability.

Regulatory environment: The regulatory environment for housing finance companies is complex and subject to change.

Significant Opportunities:

Growing market: The affordable housing finance market is expected to grow significantly in the coming years, offering ISF ample room for expansion.

Government support: The government’s continued focus on affordable housing is likely to provide further impetus to the sector.

Technological advancements: ISF can leverage technology to improve its operational efficiency and reach new customers.


Investing in India Shelter Finance presents a compelling opportunity to participate in the burgeoning Indian affordable housing sector. ISF’s strong track record, focus on affordable housing, and wide reach make it a well-positioned player in this market. However, it is crucial to consider the challenges associated with the sector, including competition, rising interest rates, and the regulatory environment.

Aditya Pratap is a lawyer and founder of Aditya Pratap Law Offices. He practices in the realm of real estate, corporate, and criminal law. His website is Aditya and his media interviews can be accessed at Views expressed are personal.

This article has been assisted by Umang Pandey, a 3rd year law student pursuing B.A.LL.B. From Lloyd Law College, Greater Noida.

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