Scheme that deals with rural credit.
Over the last two to three years, the
home loan market is being driven by
affordable housing with even HDFC
Chairman Deepak Parekh telling
CNBC-TV18 in an interview in May
that “affordable housing will be the
biggest growth engine that India
will have in the next five years”.
HDFC has seen its average loan
size drop below 26 lakh over several quarters, with growth being led by affordable housing loans instead of luxury homes, as was the case in the previous decade. “The affordable housing space will be a6-trillion
opportunity by 2022; it will become
a large segment in the housing
finance space, with an estimated
market share of 37 percent in FY22,”
says Harshal Patkar, senior analyst
at India Ratings and Research.
According to Crisil, in developed
economies like the United States, the
ratio of outstanding housing loans to
GDP is about 30 percent, in China it is
18 percent, and in India just 10 percent.
Wadhawan quotes this statistic
to demonstrate the penetration
of housing finance in different
economies which, in turn, implies,
among other social changes, rising
incomes, improving affordability,
and widening reach of financiers.
In this rising tide of financing
for affordable homes, the lenders
that are rapidly gaining market
share are not banks—they are not
focusing on affordable housing due
to factors such as high operating
cost structures and concerns over
asset quality management—but non-
banking finance companies (NBFCs).
These finance companies, which
have specialised credit underwriting
competencies tailored for low-
income segments, have business
models that give them a competitive
edge across different segments.
A May 2017 report by Crisil and
the Reserve Bank of India says
the market share of NBFCs in the
housing loans segment rose from
35 percent in 2011 to 40 percent
44 | forbes india August 4, 2017
india’sSuper 50 companies
in 2016, compared to banks.
Over the past six years, 17 new
NBFCs have entered the affordable
housing space, while most of the
existing lenders, such as Lodha
Ventures, Centrum Housing Finance
and JM Financial, are expanding
their distribution channels to smaller
cities, where loan sizes are smaller.B
ut providing low-income
segments with housing
finance did not always attract
such enthusiasm. Wadhawan, who
studied for an MBA at Edith Cowan
University in Australia, and joined the
family business in September 1996,
remembers the early days vividly.
Although DHFL was an established
name by the mid-1990s, its positioningas a lender to low-income segments
did not always inspire confidence in
bigger lending institutions. “Even
though we had a large franchise
on the ground, the perception
was that if we lent to the low- and
middle-income segments, the credit
quality of our customers would be
weak and defaults would be high,”
Wadhawan recalls. But, he adds,
the low-income segments are, in
fact, more diligent in repayments.
Wadhawan talks of a time around
2000, when, just after his father had
passed away, he was waiting outside
the office of a large public sector bank,
hoping to get a loan sanctioned. At
that time DHFL had assets worth
around `400 crore, and business was
more about sustenance than growth.CEO Harshil Mehta says DHFL is not dependent on third party direct-selling agents