New Lenders for Housing Finance, for Affordable Housing
New entrants such as Lodha Ventures, Centrum Housing Finance Ltd., JM Financial Ltd., Piramal Finance Pvt. Ltd and Capri Global Housing Finance Ltd have either started lending this year or are awaiting licences to begin operations for providing small home loans to customers in cities and small towns, aided by schemes and initiatives launched by the Central Government to promote Affordable Housing.
Housing Finance began lending in February starting with Madhya Pradesh, and plans to cover Gujarat soon. There is a huge opportunity in Tier 3 and 4 towns where there is a lot of end-user demand for housing loans. In the affordable housing segment, it is required to look beyond the traditional lending model without comprising on collateral.
Centrum provides home loans between 5 lakh and 40 lakh, and its average loan size is 11 lakh. The company plans to have a loan book of 250 crore by the end of 2017-18.
As affordable housing segment is growing very fast, and is helped by the various tax benefits and incentives like Credit Linked Subsidy Scheme (CLSS) given by the government. The risk to reward ratio in this space is also very attractive. Centrum is looking at a buyer segment which is outside the typical salaried class of people, which is catered by large HFCs (home finance companies) and there is huge demand in that space.
The housing finance business is primarily aligned with Pradhan Mantri Awas Yojana (PMAY) because of two main reasons;
- Since it will become part of building the nation with Prime Minister’s most ambitious project of “Housing For All” by 2022 and
- It will empower the weaker section of the society who can fulfil their dream of owning a house.
Affordable housing finance is set to be of 6 lakh crore opportunity by 2022, as of June 23 India Ratings and Research report.The research agency anticipates demand for 25 million homes over FY17-FY22 for Medium Income Group (MIG) and Lower Income Group (LIG) categories.
This year, two large financial services firms JM Financial Ltd and Piramal Finance Ltd said they will enter housing finance, with a focus on affordable housing. Both are awaiting licences from the National Housing Bank.