New companies entering the mortgage lending segment are emphasizing more on small home loans for customers across small towns and cities, backed by government schemes and other initiatives for the promotion of affordable housing. New housing finance companies like Centrum Housing Finance Limited, Lodha Ventures, JM Financial Limited, Capri Global Housing Finance Limited and Piramal Finance Private Limited have either commenced lending operations in 2017 or are waiting for their licenses for starting with operations.
Centrum Housing Finance started its lending operations in February, 2017 by focusing on Madhya Pradesh and is planning on expanding to Gujarat in the near future. According to the company’s managing director and chief executive, Sanjay Shukla, the company is aware of the huge potential across tier 3 and 4 towns where there is massive end-user requirement for home loans. He added that the company needs to go beyond conventional lending models in the affordable housing space without any compromises in terms of collateral. Centrum offers home loans between Rs.5-40 lakhs and the average loan size stands at Rs.11 lakhs. The company is targeting a loan book of Rs.250 crore by the end of the 2017-18 fiscal.
Lodha Ventures has got its license for operating a housing finance company and aims at starting operations in November, 2017. The company is planning to provide home loans up to Rs.25 lakhs in Mumbai and up to Rs.15 lakhs across other markets. According to Abhinandan Lodha, the founder of Lodha Ventures, the affordable housing segment is rapidly growing and is backed by several incentives and tax benefits provided by the Indian Government.
He added that there is a very attractive risk-reward ratio in this segment and the company is targeting buyer segments which fall outside the regular salaried classes who are catered to by big housing finance companies. According to the director at Capri Global Limited, Rajesh Sharma, the business model has been synced with the Pradhan Mantri Awas Yojana since this is part of the mission of Housing for All by 2022 and it will also empower the weaker sections in society who can finally own homes of their own.
Affordable housing is poised to be a Rs.6 trillion market opportunity by the year 2022 according to reports by India Ratings and Research. The agency is expecting demand for a whopping 25 million homes over the FY17-22 period across the LIG and MIG segments. A big chunk of the population may be integrated into the formal credit system for the very first time as well. This could be due to enhanced customer awareness and eligibility in the formal credit network along with possession of formal documents.
The Jan Dhan-Aadhar-Mobile trio may be a major enabler as well as per this report. JM Financial Limited and Piramal Finance Limited will be entering the housing finance market this year as well and both companies will emphasize on affordable housing. Both companies are also awaiting their licenses from the NHB (National Housing Bank). JM Financial already offers real estate lending across other segments and is now planning to offer loans between Rs.10-15 lakhs with this new housing finance company. JM Financial is planning to grow this business to approximately Rs.2,500-3,000 crore within a period of three years according to the company’s managing director Vishal Kampani.