Our Focus Is To Help Lower-income Families Own A Home: Sanjay Chaturvedi, Ceo, Shubham Housing Development Finance

Tell us about your business. What market gaps are you trying to fill?
We realised that historically a large number of financial institutions used to turn away a lot of customers who were creditworthy but could not evidence their incomes/affordability by way of acceptable income documents. It was evident that this segment of customers, though forming a significant portion of the urban working population, was denied access to loans for purchase of new dwelling units and improving their existing dwelling units. Most mortgage companies treated people with no formal income proof as being on negative lists and considered them to be a huge risk.

With this, the thought of providing access to formal credit to the vast working-class population, Shubham Housing Development Finance was formed with the sole aim of focusing on helping these urban lower-income families own a home by helping with financing. The intention is that irrespective of the source of income, Shubham Housing Development Finance would be able to provide loans to each individual for making a better home for themselves.

There’s some speculation that the domestic housing finance business is in a bubble of sorts. What’s your take on this?
A bubble forms when exuberance drives prices or when speculators hoping to make quick money drive prices up. In our segment there is a huge mismatch between supply and demand, almost all customers buy a house for self-occupation, hence we believe that affordable housing is not a bubble, this can be further evidenced by the fact that the property prices in this segment have been fairly steady.

Your website says that your motto is to help build happy homes for those who are “outside the formal income circle”. What’s your typical market segment and some of the challenges specific to dealing with this segment?
We cater to the Urban and Semi-Urban Informal Segment. By informal segment, we classify those who do not have sufficient income documentation – be it Salary slips or ITR returns or even regular banking habits. Such a group falls under the informal segment. While our loans range from Rs. 1 Lakh to Rs. 50 Lakhs, our average tickets size is Rs. 9 Lakhs. Tenures go up to 25 years and we provide loans to customers from the 21 – 65 age band, though most of our customers fall under the 30 – 40 group. This shows that our customer has been employed for a few years in which she has managed to build up equity, manage a regular job or small business and has already settled down and is raising a family. The segment is very aspirational in nature. Having achieved a degree of success in life, they are now looking at what’s next. And more often than not, building a house for themselves and their families is the next target.

Interestingly the challenge to provide housing loans to this segment is what openedup an opportunity for us. The informal nature of incomes and varying degree of property titles is what had kept this segment outside the formal credit circle. This is where we came in and developed our own propriety mechanism to assess their income. Property and legal titles are thoroughly verified by internal and external teams prior to approving a loan. These challenges had been addressed straight forward by us which has led us to achieve record growth numbers year on year.

Are there any underwriting challenges specific to your target market? How do you control quality within your portfolio?
Due to the informal nature of jobs, in the beginning, every case needed to be looked at from various angles and by multiple teams. This indeed was time-consuming as well as prohibitively costly. However, the hard work put in by us during the initial years has reaped multiple benefits in terms of the learn and re-learn process. We have gathered tons of data about each segment and at each stage of the application. Today, with the help of state-of-the-art systems, an effective risk control unit, a central underwriting unit and pre-defined templates to build the customer story faster and better, and an analytics unit that is churning out data on a real-time basis for teams to analyse. We have been able to grow sustainably.

Will the election outcomes influence your business growth in any way?
There has always been a need for housing and with the push on the affordable housing segment in the previous years, there is a lot of excitement on this front. Election results will not have an impact on us as we started in 2011 when the industry was at a nascent stage. We grew rapidly during the initial years expanding our reach across 12 states in the country. With the push on housing initiatives taken by the National Housing Bank, more people are aware of the affordable housing segment and its benefits can be seen in the growth of the industry as well.

What is your trend on NPA’s compared to your peer group?
While the demand for housing in our segment is tremendous. One report showing it to be a $220 B industry. It is still a niche industry that we operate in – Informal affordable housing finance. Historical NPA trends with Banks or with older HFCs which operate purely in the formal space is not the correct barometer. However, in the last 8- 9 yrs since we have become operational, our NPAs have been at par if not less with other players in our segment. We see delinquencies going only further down as we grow faster and responsibly.

Lastly, do tell us about some of your business goals for the new fiscal.
Our vision is to build a billion-dollar book in the next 3 – 4 years. We have a reach of 90 branches across 12 states with the aim of consolidating more within our current geographies. We have disbursed loans to more than 30,000 families and aim at touching 100,000 in the next few yrs. Along with building up our branch teams, we are actively focused on bringing superior customer experience. Expansion through our partner network and focus on the digital outreach program is on the cards as well. A continuous focus will be on improving delinquency numbers and leveraging our data to provide new products and revenue opportunities.