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Affordable Housing becoming mainstay for HFCs

HFCs are benefiting from the three major reform measures – demonetization, RERA and GST

Housing and housing finance are the two related industry segments that are forecast to grow phenomenally in the years ahead, what with the government’s thrust on housing for all by 2022 and funding massive construction activities. The estimate is that the country needs around 1 crore new houses at this point of time and with the population expected to grow, this is figure is set to go up. According to India Ratings’ forecast, the demand for affordable housing in the country would be 25 million by 2022, which is 4 times the existing number of homes. Even National Housing Board, the regulator of the sector and a refinance company, housing industry is growing at 14% to15% every year consistently

There are 71 housing finance companies registered under the National Housing Bank Act 1987 and operational, including those with total focus on rural housing. Finance minister Arun Jaitley had announced in the budget for 2018-19 that the government would establish a dedicated affordable housing fund in the National Housing Bank through various funding measures. This measure is likely to increase funding options for housing finance companies (HFCs) operating in the affordable housing space.


The government is also offering all the sops possible to realize the aim of ‘Housing for All by 2022’ like various concessions, the most important of them being a lower Goods and Services (GST) rate. Besides, two other major reforms – demonetization and the enactment of the Real Estate (Regulation & Development) Act (RERA) have impacted the industry in a positive manner.

Renu Karnad is sure RERA will add more confidence as it is largely tilted towards protecting customer interest

Renu Karnad, managing director, HDFC, which is the No 1 provider of housing finance in the country, says the housing sector has positively impacted by the reforms. “Demonetization has helped the sector in reducing the black money menace. Also, due to higher income disclosures and the so-called unproductive money moving into the formal economy, the prospects for homebuyers have improved in the primary and secondary markets. RERA and GST are both welcome measures. It is inevitable that in the initial stage, all major legislative reforms will pose challenges as they do require recalibration and structural adjustments. Yet, these measures will bring in the much-needed transparency into the sector and will be beneficial over the longer-term,” she says.

She is also confident that the government’s relentless drive to eliminate corruption, curb black money through multi-pronged approaches will strengthen the real estate sector.



Harshil Mehta foresees higher demand for housing finance from tier 2,3 and 4 cities in the days to come

According to Harshil Mehta, joint managing director and CEO, DHFL, housing industry has received a boost from the augmented growth in the affordable housing segment in the last few years, which has been driven by the government’s vision of ‘Housing for all by 2022’. “This has also been led by industry-building initiatives like the Credit Linked Subsidy Scheme (CLSS) under the Pradhan Mantri Awaas Yojana (PMAY) and the doubling of the budget allocation for affordable housing to Rs8 billion. The government has also granted infrastructure status to affordable housing, which has enabled the projects to avail benefits such as lower borrowing rates, tax concessions and increased flow of foreign and private capital. Policies and structural reforms, such as RERA and GST are playing a transformational role in opening opportunities, improving transparency and enhancing consumer trust, thus evolving the real estate industry outlook. Through these initiatives and the drive to create smart cities and Digital India, the government is transforming the housing sector towards higher consolidation, greater efficiency, increased transparency and better connectivity through digitization,” he says.



Ashwini Kumar Hooda underscores the changed perception of housing as a social objective to that of a primary requirement of people

Ashwini Kumar Hooda, deputy managing director, Indiabulls Housing Finance, believes the introduction of several path breaking initiatives by the government has brought about tectonic changes within the country. The introduction of RERA has created increasing transparency and thus customer confidence within the industry, he says, adding: “Under RERA, the developer will not be able to divert funds received from flat buyers to outside the project, with 70% of receipts earmarked towards the project. Similarly, delivery timelines are monitored by the regulator with penal provisions for failure to deliver within committed timelines. Prospective buyers will have access to this information and violations by the builder will have adverse impact on sales offtake. Developers will thus have to launch projects where they are sure of completion and have good visibility of sales. Also, historically, the affordable housing space has been dominated by small, unorganized players, who are not full-time developers but owners of small parcels of land, on which they construct and sell residential apartments. Such developers may not have the organizational capabilities to comply with RERA provisions and have the operational bandwidth and maturity to manage the compliance requirements. The market is already witnessing many such single land parcel owners entering into JVs with larger builders to jointly develop their projects and such JVs will open these projects for credit from large organized lenders, especially HFCs and banks. Thus, while in the short term the developers may grapple with RERA implementation problems, but in the long term, it will have far reaching benefits to the real estate industry as a whole,” says he.


Khushru Jijina is confident that affordable housing will become the industry’s demand driver in future times

Khushru Jijina, managing director, Piramal Finance and Piramal Housing Finance, concurs. Says he: “All these government measures were disruptive in nature in the short term but necessary for the longer term. Once the initial confusion following the implementation of RERA and GST has died down, the industry has seen renewed confidence and interest from investors who have viewed this positively as a move towards higher standards of transparency and institutionalization. Consolidation of developers is another derivative of these measures as there is now an inherent requirement to be more accountable and to have enhanced corporate governance and capital structure. We have also seen new targeting the affordable housing segment as driven and desired by the government. In fact, affordable housing has emerged as the solution to the country’s problem of housing for all, and with well-defined incentives is now being taken up in earnest by all developers as an opportunity.”

Anil Kothuri believes housing sector is suddenly turning to be a regulated sector with the introduction of reforms like RERA

Anil Kothuri, president and head, Edelweiss Retail Finance, is of the view that the broad impact of the recent government initiatives is to bring about formalization in the economy and to make real estate transactions more secure. “While there are pangs of transition that have gripped the real estate sector, the long-term impact of all these changes is positive. RERA will enable purchasers of property to embark on the exercise with greater confidence and impart certainty to the home buying process. GST will ensure greater number potential buyers have a financial footprint, thereby making them easier to lend to,” he says.





Arvind Hali is confident that measures like GST and RERA will bring in standardization in the housing industry

Arvind Hali, managing director and CEO, ART Affordable Housing Finance, a company providing long-term housing loans to customers belonging to the economically weaker sections low and middle income groups in peripherals of urban and semi-urban India, says the 3 initiatives of demonetization, RERA and GST have had an adverse impact on the housing development and housing finance in the immediate aftermath. But he is confident these measures will ultimately prove to be key drivers of the real growth in real estate. “Demonetization has brought a lot of working population into documented income papers, creation of banking records and improved banking habits. This will have a direct bearing on the creditworthiness of these customers and will provide confidence to the lender to provide loans. GST, similarly, brings in uniformity and lowering of cost due to input credit benefit that gets transferred to the customers. The government has already lowered the applicable GDST from 12% to 8% for affordable housing as well as advisory that even this 8% will get offset for the builder by input credit. RERA provides for the rights and obligations of the customer, developer / builder and real estate agents as well. It provides for clear roles and defines rights apart from defining the standards of development of residential and commercial complexes. The standardization so created will ultimately come as rescue of the customers who felt hapless at the hands of developers in the earlier regime. It will also enforce discipline in the developer / builder segment and create a win-win situation for seller and buyer in the long run,” says he.

Deo Shankar Tripathi, managing director and CEO, Aadhar Housing Finance (formerly DHFL Vysya Housing

Deo Shankar Tripathi maintains that NPAs forced banks to turn to housing finance in a big way

Finance), which is also into the affordable housing segment, says the housing market across the country has shown good improvement during the last 6 months and is poised to come back to its full scale. He says demonetization was one of the unprecedented disruptive move, which initially hit many sectors, particularly the housing sector, and created lots of uncertainty among developers, buyers and investors. But, the surplus liquidity in the banking system arising out of demonization triggered interest rate cut by the banks and both these events signaled revival of sentiments in housing market, he adds.

“And while demonetization cleansed the housing sector, RERA and GST brought about much needed transparency. These measures boosted the confidence of actual home buyers and discouraged the speculators and investors. Gradually developers have also aligned with these reforms. Flow of institutional and foreign funds are expected to improve in the housing sector,” he says.


Karnad of HDFC, while conceding that RERA had led to some slowdown in new launches, but the difficulties faced initially are already fading away as the developers are aligning themselves in accordance with RERA. She stresses that RERA will add more confidence as it is largely tilted towards protecting customer interest. “Buyers are confident while buying houses and this is clearly reflected in our retail loan book, which has been seeing a healthy growth,” she points out.

DHFL’s Mehta too points out that post-implementation of RERA, there has been no slowdown in the real estate and the housing finance sector and in fact the measure has given the Indian housing industry its first regulator. “The implementation (of RERA) has been extremely beneficial in protecting consumer interests, increasing clarity, ensuring efficiency in property-related transactions, improving accountability of developers, enhancing transparency, boosting consumer confidence. This positive scenario is attracting more investments to the real estate sector and thus, bolstering demand for the housing sector and hence the housing finance sector,” he says.

Says Jijina of Piramal Housing Finance: “The slowdown is in the residential space and is primarily due to the end buyer’s confusion of whether to purchase now or wait. This confusion has been on account of multiple things, which include RERA and certain inconsistencies (between completed and under construction units) in the GST regime. This was also clubbed with an expectation of further reduction in interest rates, which has not transpired. Sales have been affected throughout markets, primarily in the higher end luxury projects and on a more general basis for tier 2 developers. This has led to reverse JDAs being entered into with top tier branded developers as well as newer launches focusing on end user affordability. With limited stock and slow growth in the existing luxury space, the consolidation phase seems to be tapering off. The next demand cycle will be led by affordable housing and will further depend on the developer’s capability of working on lower margins and quick execution.”


Kothuri of Edelweiss Retail Finance describes it as the transition from being an unregulated sector to a regulated one and this has been sudden. “The real estate industry is coming to grips with it. There has been a lot of traction after a slow start. Both builders and buyers have begun to embrace RERA owing to the clarity and advantages that it provides,” says he.

The government has given a whole lot of emphasis on affordable housing. Is such a policy beneficial to housing finance companies? What are the issues in general in financing this sector?


Karnad believes the opportunity in affordable housing segment is huge and the government has provided the right thrust on encouraging people to buy houses, particularly affordable houses. This, she says, is reflected in a number of government programs and incentives such as granting ‘infrastructure’ status to affordable housing, 100% tax deduction to developers, credit linked subsidy scheme, etc. “This massive boost from the government to affordable housing has made it favorable for homebuyers to buy homes and this in turn has provided huge opportunity for housing finance companies,” says she.

Mehta of DHFL feels the Indian economy and the affordable housing finance industry within it are at very exciting stages. “The recent push by the government to achieve its objective of ‘Housing for all by 2022’ and various policy reforms, structural shifts, development initiatives towards this objective are expected to boost sale of affordable and low-cost housing units and consequently, boost the housing finance industry. Additionally, the government has been taking the right steps to build strong conducive policy frameworks towards greater financial inclusion to support the affordable housing finance sector. Rise in affordable housing projects is one of the factors driving disbursements up post demonetization over short to medium term. As a result, India’s affordable housing sector is emerging with renewed confidence, stronger investor sentiment and a favorable macro-economic environment,” he says.

He also points out that DHFL is one of India’s leading affordable housing finance companies financing the affordable housing sector for 33 years and it has recorded 3 successful decades in the housing finance sector registering a steady growth quarter on quarter.


For Hooda, the important thing is that the government has changed its perception of housing from that of a social objective to that of a primary requirement of the population. “The government has made housing, especially affordable housing, the center piece of its economic policy. It has concentrated its singular focus on the housing sector through various schemes like ‘Housing for all by 2022’, ‘Pradhan Mantri Awaas Yojana’, ‘Affordable Housing Plan’, etc. In addition, it has taken concerted steps with various sectoral regulators to align policies and fiscal incentives to incentivize the housing sector. It has enhanced the scope of affordable housing for all stakeholders – buyers, lenders and developers, through various policy measures,” he elaborates.

He also mentions that since inception, Indiabulls Housing Finance has been focused on the prime mass market affordable housing opportunity and its typical customer is a white-collar worker with an average salary of Rs10 lakh per annum. “Our average home loan ticket size is Rs24 lakh for a house of Rs35 lakh. We majorly operate in the outskirts of metros and tier 1 cities. Over 95% of our portfolio would qualify under one or the other affordable housing definition provided by various regulators. In FY17, the affordable housing market grew by 33% as compared to overall home loan market growth of 23%. This is further expected to increase with the introduction of the PMAY, resulting into an effective home loan rate of 0.30% against rental yield of 3.2% in the top 12 Indian cities. Having developed a strong experienced underwriting team over the past decade and with our technology initiative in the form of eHome Loans, we are well equipped to serve the humungous affordable housing finance demand.,” says Hooda.


Jijina also sees affordable housing to become the industry’s demand driver in the years to come. He says a developer’s challenge of access to low cost capital has been addressed by the government in multiple ways now, like infrastructure status to affordable housing and the setting up of dedicated affordable housing fund. “With more than 50% of the launches over the last one year in the affordable category, housing finance companies have already started to focus on creating customized products for the eligible clientele. We at Piramal Housing Finance have invested heavily on building analytics for a strong due diligence to identify the right clients. With the blueprint to have presence in tier 2 and tier 3 markets, we are ready to meet the demand from this segment. Further we firmly believe that the non-salaried class is a huge potential for affordable housing and hence have created products that can meet the funding requirements of such clients,” he says.

Kothuri of Edelweiss Retail Finance says the government has announced that it will construct over 50 lakh homes in the coming year and the construction of affordable homes has been given the status of an infrastructure industry, which means lower cost of funds. “All these will significantly enhance the stock of new homes that HFCs can fund. There are also interventions on the demand side. Loans for affordable homes are subsidized by the government under PMAY making home purchase and loan servicing more affordable,” says he.


Hali of ART Affordable Housing Finance points out to the fact that all government agencies responsible for housing growth like NHB are under direct review by PMO and this indicates the seriousness of the government. “Customer benefit schemes like CLSS for EWS and LIG have been expanded to MIG-I and MIG-II as well and decisions have come fast to extend the scheme dates and include higher property sizes under the gamut of CLSS. On the other hand, benefit schemes of Regular Refinance Fund, Urban Housing Fund, Rural Housing Fund, World Bank Urban Housing / Low Income Housing Fund, Refinance for Construction Finance are all set to provide impetus to affordable housing finance sector,” says he.


One of the fallouts of the NPA problem confronting banks is that banks are less willing to lend as they work on cleaning up balance sheets. This has hit the housing sector as well leading to a situation where credit and demand for housing are still growing, the finances are not forthcoming. Do HFC perceive an increased role in this situation?

Jijina of Piramal Finance believes HFCs have a role here in bridging the demand gap. “With the benefit of having a regulatory arbitrage and being closer to the market, we are better equipped to offer customized solutions to our clients. However, as the recent study from RBI pointed out that NPAs in affordable housing loans also increased during 2016-17, it is important to have the wherewithal to identify the right client. We work on a partnership approach and have identified developers who have learnt to control costs and are looking at higher volumes and quicker sales through affordable housing projects i.e. an uncompromised focus on execution. With our capability to help developers to achieve financial closure in a post RERA world, coupled with a unique ability to also fund the target end buyer through our HFC, we feel we are strongly placed to drive further growth in this segment,” he explains.


Hooda of Indiabulls Housing Finance says the NPA problems pertain largely to corporate lending by banks and home loans represent the lowest risk asset and so every home loan lender continues to focus on this segment. “However, over the past decade, PSU banks have been losing market share and this has not been for reasons of shortage of capital or NPA problems. There has been only 11% growth in banks’ home loans credit year-on-year. These banks’ competitive position has been deteriorating vis a vis ICRA/ CRISIL rated AAA HFCs. Thus today, SBI is the only active PSU bank in the home loan market. The advantage that banks have on low cost of funds from CASA is lost in high opex from an extensive branch network that they need to maintain to raise the low-cost CASA in the first place. Even banks like SBI, Axis Bank and ICICI Bank, which are the only relevant home loan lenders among banks, operate on very thin margins, as low as one-third that of AAA rated HFCs, in the prime home loan segment. For PSU banks, the margins are further compressed due to high credit costs and hence their operating margins are even lower. Even new age banks that are otherwise very successful lenders find home loans unviable as many operate at even higher cost-to-income and offer higher rates on their savings account,” says he.

Hooda also explains that PSU banks are handicapped in their distribution ability since the distribution point of a home loan is currently the point of sale, ie the construction sites. “Sales team of all large housing finance players and private banks are present on these construction sites round the year. The average age of an employee in the PSU banks is over 45 years. At this age, these employees cannot be expected to sit at construction sites 20-40 km outside city centers. Thus, PSU banks have negative selection as customers rejected by major players walk into PSU bank branches. The distribution point is now shifting to the mobile phone of the customer. With the average age of a home buyer now below 35, these tech savvy customers prefer to operate from the comfort of their home on their mobile phone,” he adds.

“I feel that the coming decade will belong to HFCs who will incrementally continue to take market share away from banks,” says he.

Kothuri of Edelweiss argues that the penetration of mortgage loans has been increasing year after year and no borrower who is looking for a loan has to go without one since there are multiple institutions vying for business in each location.


Hali of ART Affordable Housing Finance states NPA problems faced by banks are not related with retail lending and especially housing sector. All banks are equally chasing the home loan prospects like any other HFC, he says. However, he believes affordable housing sector is a different ball game altogether since it has its own sets of temptations – small ticket sizes, government push, end-user customer profile, government subsidy to customers, refinance options to financiers, PSL categorization for lenders and infra status for projects etc. “This has let all stakeholders to, kind of, celebrate the movement with ambitious and exciting strides,” he says.

He says the impetus for affordable housing has led the number of accounts under small value loans up to Rs 10 lakh swell sharply in 2016-17. But, there is also an increase in NPAs, particularly for the lower slabs. “But I believe this is a temporary phenomenon, and there is a significant upside to affordable housing. Most HFCs, especially newer ones, are interested in expanding their balance sheets.,” says he.


He also corrects the perception that affordable housing loans are like sub-prime loans or credit being given to credit impaired customers. “It’s just that these customers may not have documented or regular income statements; borrowers tend to be self-employed, working in the unorganized sector. If we look at the subprime crisis in the US, the issue was that there was no control over the loan-to-value (LTV) ratio; you had teaser rates, NINJA loans (no-income-no-job loans) etc. If I look at my own portfolio, only approximately 60 % of the customers, we source, have credit bureau scores. We have adopted technological interventions to save time and prevent frauds, we have created robust verifications, we have specialized underwriting and we stick to basics. It is early to make comments on our portfolio however so far our methods have not given us any early warning signs with our bounce rates being negligible and delinquencies virtually nil,” he says.

Tripathi of Aadhar Housing Finance says the high level of NPAs has indeed forced public sector banks to change their focus. But this is actually from big loans to corporates to offering housing and retail loans. “Hence, the flow of finance for housing has rather increased. There is growing competition in housing loan market because of the presence of large number of players. But, HFCs play a very active role in reaching out to all categories ranging from high net worth to mid income and to low income group. Quick turn around and door step approach of the HFCs give them an edge over banks,” says he.

Hali says the approximately Rs16 lakh crore Indian housing finance book is divided among banks and HFCs with banks having a share of 62% of the loans disbursed. However, recently, HFCs have made big strides and almost 78% of this share is with the top 7-8 HFCs. “We as an HFC are poised for growth with direction of pedigree promoters, young team with proven track record and continuous innovation riding on technology in the congenial environment of housing development in India. We have ambitious plans for 3 -5 years in phased execution,” says he.


Karnad of HDFC says the company being a pioneer in housing finance in India has built the required expertise not only in India but has also has become a role model for a number of countries that have begun to establish their own housing finance institutions. “Internationally, we have undertaken consultancy assignments closely with the World Bank, USAID, the Asian Development Bank, United Nations and the Commonwealth Development Corporation (CDC) in a number of countries in Asia and Africa, including Sri Lanka, Bangladesh, Indonesia, Bhutan, Nepal, Ghana, Egypt, Thailand, Philippines, Mauritius, Maldives, besides Jamaica, Russia among other countries. This is the 40th year of our operations and we will be entering our golden decade. We are more excited today than we were 40 years ago, about the prospects of housing in India. The real estate sector in the last few years has gone through a massive transformation. The sector has witnessed a plethora of reforms such as PMAY, GST, RERA, demonetization, etc. Affordable housing has been granted infrastructure status. Also, with rapid economic growth, easy availability of finance coupled with high disposable income has made many Indians look favorably at buying a home of their own,” says she.

She also maintains that the government’s thrust on affordable housing by way of CLSS for EWS, LIG and MIG segments, interest benefits on home loans and plethora of other initiatives such as smart city and AMRUT project puts housing especially the affordable housing segment in sweet spot for coming years. “There is a huge scope for growth (for housing sector) in India especially since the housing loans to GDP ratio is at an abysmally low at 9%, while China is at 18% and most of the advanced economies at 60-85%,” says she.


Mehta of DHFL says his company has identified its role slightly differently. “Over the last 3 decades, we have been enabling home ownership dreams of the low and middle-income segment in the tier 2 & 3 towns. Our powerful communication to engage with potential customers and the community at large has proved effective in seeding the thought of home ownership. We are committed to customer centric products and processes. Proactive communication with existing and new customers, best-in-class technology and processes for enhanced efficiency have all bundled to offer a robust customer centric delivery mechanism. We offer wider support to customer access through tie-ups with select public and private sector banks to widen reach. Apart from home loans, we also offer other mortgage backed property (non-housing) loans, SME loan products and project funding especially targeted towards the affordable segment,” he says.


Hooda says increasing affordability on the back of steady wage inflation combined with rock bottom home loan interest rates and tepid property price inflation has resulted in higher demands for home loans especially from tier 2, 3 and 4 cities. People from lower tier cities who were earlier ineligible to take a home loan have now enough disposable income and qualify to get a home loan. “We could not cater to this segment earlier due to the high cost of setting up operations in such cities. The costs outweighed the opportunities available in this market. To overcome this roadblock, we have digitized our offerings with leaner tech-efficient home loan branches in these cities. Supported strongly by the digital infrastructure of eHome loans, our Smart City initiative which is to spread into tier 2, 3 and 4I locations continues to have strong traction. Our geographical mix of home loan sourcing shows that in 2012 we had 85% of the loans coming from top 20 cities. Now 70% of the loans come from the top 20 cities. By FY20, this will further shift to only 50% of the loans coming from top 20 cities while the rest coming from smaller cities, thus gaining immensely from the vast unfulfilled housing demand in these smaller cities.,” he says.

With affordable housing as the focus of the government and all sops around it, most of the developers are looking to this sector for their next development plans. Jijina says even financial institutions are betting big with announcements to invest around $4 billion in affordable housing projects. “We are typically focused on funding projects in major metros; however, we see tier 2 cities witnessing lot of activity on the affordable housing front. Hence entering these markets is the next plan of action. On the housing finance side, while we have started by rolling out our branches in the metros, the plan was always to establish our presence in tier 2 and 3 cities. In fact, we have fast tracked our own internal plans of expanding into these cities and you will see some announcements being made in due course.

Piramal Finance has already been into the business of real estate financing. Extension into the retail space through housing finance was just an extension of its product portfolio. Jijina says with a loan book of around Rs65,000 crore at a platform level, the company is confident about meeting the demand the sector envisages.” Again, our unique ability to cater to the entire capital stack, provide both equity and debt to a project and ultimately fund the home buyer as well as a distinct competitive advantage that will translate into further growth in our wholesale and retail business,” he says.

Kothuri of Edelweiss Finance affirms that cities outside of the top 10 largest ones is where the market is getting created. He says Edelweiss currently has branches in over 100 cities across south and west India. There are another 50 branches on the anvil which will help the company optimize its presence across the country, says he.

Tier 2,3,4 ON THE RISE

Karnad sees more demand for housing finance coming from tier 2, 3 and 4 centers and peripheries of big cities, basically on account of favorable demographics and inherent demand for housing. She says the PMAY has been a real booster to meet the demand of housing in these cities. “We have been partnering with the government wholeheartedly. We have also been educating the customers about the benefits of these schemes by conducting seminars, presentations, Q&A sessions and on the spot counseling across the country. We have trained over 1000 developers, trained and reached over 30,000 channel employees and developers’ staff, and over 2000 of our in-house staff. We have a fully developed training module and have conducted online campaign on various social media platforms to reach out to a wider audience,” says she.

HDFC, says Karnad, has been on an average approving 8000 loans on a monthly basis to the EWS (household income up to Rs 3 lakh pa) and LIG (household income between Rs 3 lakh and Rs 6 lakh pa) segment, with monthly average approvals at approximately Rs 1300 crore. During the 9 months ended 31 December 2017, in value terms, loans to the EWS and LIG segment grew by 32% and 39% respectively over the corresponding period in the previous year. The average home loan to the EWS and LIG segment stood at Rs 10.24 lakh and Rs 17.38 lakh respectively.

Mehta also foresees higher demand from tier 2,3 and 4 markets. He says higher transaction volumes in non-metro centers and fiscal incentives on housing loans along with more options in the affordable housing segment have led to a robust off-take of the housing finance industry. “We focus primarily on the lower and middle income, groups which are concentrated in tier 2 and 3 markets across India and we have developed a business model and an attractive suite of products to cater to them. We maintain pan-India presence and marketing in over 350 locations in India which further services 500+ locations,” says he.

Hali of ART Affordable Housing Finance says affordable housing is sewn closely to development in RURBAN areas. A large section of affordable home buyers in the EWS and LIG segment migrate from rural areas towards areas seeing development thus create nuclearization of family and a planned fillip, therefore, in agrarian economy embedded with social infra development, economic boost for job creation, health schemes to absorb economic shocks, etc.

Aadhar Housing Finance has been reaching out to the tier 2,3 and 4 markers through a hub and spoke model. The company, says Tripathi, has been seeing a growing demand in these markets and it has set up branches at 275 centers and through these branches it covers about 1500 location in 19 states.


Earlier, it used to be interest rates that were the deciding factor for a customer to select a HFC. But, now there are other considerations, including TAT, ease of dealing etc. What are the major sops that HFCs offer to the customers to attract them?

Karnad says interest rate, though an important factor in entire the value chain, is only one link in the chain. “There is lot more a homebuyer needs to consider keeping in mind long-term implications of the entire transaction, property value, builder’s track record and most importantly the right information to make a sound decision. Customers come to us because we also offer ‘HOME LOANS’. What this means is a home loan is something everyone including us offers but what is different is the value addition we bring to the table. We are a specialized and focused home loan provider. We provide our customers the benefit of our experience by assisting them on the documentation, loan options, legal and technical guidance. A home loan from HDFC is not just about money but a whole lot of things that goes to make the experience of buying a house a memorable one for our customers,” she elaborates.

Mehta says DHFL, while offering a range of home loan products to suit borrowing capabilities across different classes of borrowers, it takes special care to enable the LMI segment to access home loans. This is done by designing the products and processes. “To facilitate affordable housing finance for the economically weaker sections, we actively participate in NHB’s various schemes, such as the Golden Jubilee Rural Housing Refinance scheme and Pradhan Mantri Awas Yojana; and offers range of customized products and benefits especially suited to this segment,” says Mehta.

The company also conducts targeted educational programs for diverse target customers about PMAY schemes, loan eligibility and processes, etc, holds Griha Utsav, a unique property expo where reputed builders exhibit their offers in affordable housing in tier 2 and 3 towns.


Hooda says since all the HFCs offer almost the same rate of interest, the differentiating factor for a customer would be the convenience with which he can transact and the fastest turnaround time he can get. “Technology plays a major role in enabling a lender like us to extend such facilities to a borrower,” says he.

He explains the current scenario” “We have completely revolutionized the home loans distribution model. A decade ago, home loans sourcing was branch centric typically involving multiple visits to the lender’s branch to even complete the loan application process. A typical home loan would take 7 to 10 working days to get processed and approved. By the end of the last decade, private banks and HFCs like ourselves drove customer centric sourcing and as with other retail lending products, home loan origination moved to point of scale which for home loans meant presence of sourcing staff at residential constructions sites. The sales persons engage with the customer right from the stage when they are yet to finalize the property. Underwriting and credit decisioning was pen-and-paper based. In the mid of 2016, we introduced an industry pioneering, global first, end-to-end online home loan fulfilment platform providing access to Indiabulls’ home loans at customers’ fingertips. With eHome loans, we took the first step towards digitizing the process and made a pioneering move for the home loan industry.”

Jijina says Piramal Housing Finance was launched with a differentiated approach of meeting the transactional requirements of home loan buyers. “While most of the players have been focusing on the emotional aspect of owning a home, our primary focus has been to work on our clients’ aspirations and expectations from a home loan. We have heavily invested into technology to provide a seamless experience to our clients and our tag line ‘Loan Se Pehle Log’ is the overriding principle. Products like ‘SUPER’ loans whereby a customer is able to get up to 20% higher loan eligibility and simple measures like charging a client only on handover of disbursement cheque, are few examples where we are trying to meet our clients’ aspirational requirement from a home loan. Our traditional products like LAP (loan against property) and construction finance have also been re-examined in the context of the market’s current needs. ‘Piramal Verified’ is another key attribute that gives projects a status that implies that the project meets all legalities and technical requirements such that the customer can invest with complete confidence in the project,” says he.

Edelweiss Retail Finance differentiate itself based on its superior service and the ability to underwrite customers who do not have papers to evidence their income. “We invest a lot of time in understanding the customers income and profile and make a loan possible,” says Kothuri.


ART Affordable Housing Finance, according to Hali, is a digitized organization that leads to saving time and cost for the customer apart from a hassle-free experience. “For example, we do not make the customer fill the tedious physical form; instead we do it on a tab so the application reaches the company in real time. We do not ask for photo copies of documents, but we take photos on the spot, we inform the customer about the status of the loan at every step and this is being automated, we have most verification processes in digitized form, in cases where a customer does not have formal / documented income, we assess their income basis a unique assessment methodology and we advise the customer about what loan amount would be best suited for him/her given their income levels. We are undertaking an end to end digitization with use of e-KYC, e-Sign and digitized documentation process along-with automated decision making involving use of scorecards based on traditional and non-traditional data analysis.” says he.

Tripathi, however, maintains that the interest rate has been and will remain one of important deciding factors but timely availability of credit with ease will be equally important. “Banks or HFCs, which are having competitive interest rates with short TAT from login to disbursement will have the edge. However, informal segment customers in affordable housing do not possess all the required income documents. For such customers, getting credit with ease is the priority, not the interest rate. Hence, HFCs focusing on this segment have an edge over other HFCs and banks,” says he.

He mentions that the Aadhar Housing Finance has a unique approach to reach out to customers by carrying out high impact low cost financial literacy and awareness activities on regular basis in new locations. Its sales teams maintain good connect with the customers before and after the loans are disbursed. Besides, the company’s existing customers are its brand ambassadors.

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