Birla Home Finance Originally incorporated as ITC Classic Home Finance in 1995, BHF was taken over by the Birla Group in 1999, through its fertilizer company, Chambal Fertilizers and Chemicals Limited. In September 2000, BHF became a 50/50 joint venture between Chambal Fertilizers and Chemicals Limited and BHW Holding AG. Owing to its strong sponsor support, BHFs profile has changed considerably since its reformation as a joint venture. The sponsors have injected additional capital into the company over the past twelve months. As a result, BHF''s net worth increased from approximately $12 million to $23 million. This increase will place BHF in the top tier in terms of capitalization among the housing finance companies in India. Similarly, BHFs loan portfolio grew by more than 200% in the last fiscal year and by an additional 34% in the first half of current year.  BHFs goal is to be a recognized leader in the Housing Finance Market in India in the next 5 to 10 years.     Purpose of Project   :  The project will facilitate the expansion of BHF mortgage loans to creditworthy clients that are constructing, acquiring and improving of residential properties. The IFC loan will:    - strengthen BHF''s balance sheet by augmenting critical long term funding available to the company;   - support BHF''s initiative to introduce new mortgage products into what has thus far been a "plain vanilla" mortgage market and to expand portfolio, and    - support the expansion of strong private sector housing finance companies so as to offer borrowers credible alternatives to market leaders.    IFC will also encourage BHF to endeavor to develop a portfolio of conforming, standardized mortgages with a view to securitizing its assets once the market for MBS has been firmly established.     Development Impact   : A significant development impact is the extension of housing finance to, and therefore an opportunity of home ownership for, lower-income households in semi-urban and urban areas. This segment, which BHF focuses on, has had limited access to credit, particularly in the semi-urban areas. The tenor of IFC''s loan would enable BHF to provide long-term, and thus, more affordable mortgage credits. With the increased affordability, more individuals could access funding to purchase homes or renovate their existing dwellings, thus addressing the poor condition and shortage of housing in India. Further, through extensive linkage effects, the housing industry will contribute to the development of SMEs that supply labor and materials for the construction and improvement of homes, a major contributor to economic growth in India. In the case of BHF, increased home ownership by lower-income borrowers will help boost housing-related industries in the semi-urban regions.      IFC Role:    Despite significant improvements in the supply of housing finance, India continues to face serious deficiencies in meeting the housing needs of its rapidly growing urban and semi-urban households. As a result, in the next several decades, India will require massive investments in the housing sector. Some of the major constraints that are limiting the availability of housing finance result from three critical factors: very few strong, credible, and well capitalized players; absence of adequate funds in maturity, structure and volume required for housing finance; and very limited reach of the lenders outside the major urban centers, specially in the semi-urban and rural areas where shortage of both housing and finance is most acute.   IFC will address the first constraint by investing in the building of a well capitalized institution to become a meaningful player in India''s housing finance sector. By providing a long-term, local currency loan to the company, IFC will play significant role in making available the scarce and critically needed term funding for the company to appropriately fund its mortgage assets and improve asset-liability management. Additionally, IFC''s emphasis on making BHF''s operations "securitization friendly" will give the company a head-start in tapping institutional funds through securitization.  Finally, IFC will support the extension of housing finance to the underserved households by working with a company that has a strategy which addresses the needs of the least served segment of the market, namely the semi-urban and rural areas where the shortage of housing is most severe.