Driven by rising incomes, enhanced affordability and substantial government support, the Indian housing finance industry is on a growth trajectory with a robust 13% Compound Annual Growth Rate (CAGR) over FY23-26.
In the past few years, specifically post-Covid, there has been a consistently robust performance, punctuated by occasional seasonal dips.
Recently, the Reserve Bank of India (RBI) in its data on ‘Sectoral Deployment of Bank Credit’ said that the credit outstanding to the housing sector rose by nearly Rs 10 lakh crore in the last two fiscals to reach a record Rs 27.23 lakh crore in March this year.
Experts attributed this growth in housing credit outstanding to a strong revival in the residential property market post-COVID pandemic on pent-up demand.
These developments show forthcoming quarters to yield positive outcomes for both Housing Finance Companies (HFCs) and Non-Banking Financial Companies (NBFCs).
Amid these developments, ETBFSI talked with a few Housing Finance Companies to understand their views on the recent trends in the industry:
Use of technology to underwrite better:
Rahul Mehrotra, MD & CEO of Religare Home Loans said the biggest trend seen in the industry is towards using technology to underwrite better and also to give a seamless experience to the customers.
“With new residential property launches increasing pace in the current fiscal, there has been a strong positive movement in the real estate prices after a long gap. Most of the HFCs have further strengthened their distribution networks and expanded to Tier2 and Tier 3 towns,”Mehrotra said.
“To cater to their increasing business appetite, the HFCs are overtime working to raise capital/ debt so their growth has sufficient fuel available not only for this FY but for the next FY as well.”
Further, Pramod Kathuria, Founder and CEO, Easiloan praised the emergence of digital verification processes.
He said the traditional identity verification processes are time consuming and prone to errors. With the emergence of digital verification processes driven by biometrics, it has now become the top choice of lenders for identity verification.
Sangeet Aggarwal, Head of Product & Design, Housing(dot)com said the use of AI and ML streamline loan approvals, predict default risks, and detect fraud, making the process faster and more secure.
Collaboration is the key:
Pramod Kathuria of Easiloan said the collaborative lending arrangements between traditional banks and NBFCs are becoming increasingly significant. Such partnerships enable borrowers to tap into a broader spectrum of home loan options, thereby enhancing their approval prospects.
“Through co-lending partnerships, the combined expertise of these entities is harnessed to offer improved loan products and elevate customer satisfaction,”Kathuria said.
Sangeet Aggarwal of Housing(dot)com said the borrowers benefit from seamless home-buying experiences, thanks to collaborations between financial institutions and real estate portals.
Customized Loan Products
Pramod Kathuria of Easiloan said lenders are focusing on providing personalized loan products that cater to the specific financial requirements and aspirations of borrowers.
“Such offerings include flexible repayment options, diverse interest rate selections, and loan terms that resonate with borrowers’ preferences.”
Rahul Mehrotra of Religare Home Loans said we will witness Digital House hunting and buying processes for the ease of customers to demand generation.
“There seems to a be a clear move towards scorecard based lending by the HFCs to understand the credit profile of the prospective customers quickly and more holistically. This would help grow the business with a much faster pace,”Mehrotra said.
Sangeet Aggarwal of Housing(dot)com said the smart contracts on blockchain automate mortgage processes, enhancing transparency and enabling fractional ownership of real estate assets.
Alternate Credit Scoring
The experts also suggested the new and emerging credit scoring tools by the lenders in the industry.
Pramod Kathuria of Easiloan said the lenders are delving into alternative credit scoring approaches that consider factors beyond traditional credit reports. This entails evaluating utility bill payments, rental track records, and even social media activity to gauge creditworthiness.
Sangeet Aggarwal of Housing(dot)com said the machine learning algorithms analyse diverse data to extend credit to more borrowers while managing risk effectively.
Rahul Mehrotra of Religare Home Loans also gave a point for caution. He said the lenders should not go overboard, and ensure that the credit underwriting and risk parameters are duly judged and decisions taken upon.
