Micro Housing Finance Corporation (MHFC), the first such institution to foray into the low-cost home segment, has attracted Rs 25 crore in private equity funding from India Financial Inclusion Fund (IFIF) and Michael and Susan Dell Foundation.
MHFC is looking at disbursing loans to urban buyers, who may constitute the unbanked population, looking at buying a sub-Rs 5 lakh home. The firm, which started operations in June, is forecasting 1,500 loan sanctions amounting to disbursal of Rs 60 crore in the first year of operations. The firm will look at another round of funding in next one year to expand its equity base. After the current round, the equity base will rise to Rs 33 crore, which could be leveraged 4-5 times, feels Rajnish Dhall, director, MHFC.
The Mumbai-based firm received its license from National Housing Bank (NHB), the housing finance sector regulator, in February. MHFC plans to give loans which will not exceed 80% the cost of the house, typically ranging from Rs 4-6 lakh. The loans carry an interest rate of 12-14%.
The firm provides loans on a project basis, and is not involved in retail loans. "We approve projects and then do lending on those projects," said Dhall.
For instance, MHFC has tied up with Tata Housings' Shubh Girbha project in Boisar which has 1,500 flats in the Rs 3.9-6.8 lakh range. The firm has also tied up for five other projects in Ahmedabad and Virar and Karjat in Maharashtra.
MHFC will ideally target developments of around 1,500 flats where it can finance around 20% of the flats. Besides private developers, MHFC is also looking to tie up with state housing boards.
"But that’s just scratching the surface as the demand is very strong," said Dhall. MHFC has a target of 50,000 homes in five years, which would mean a loan book of Rs 2,000 crore.
Dhall was a senior director with American Express before leaving his job to work for an non-governmental organisation helping street kids in Mumbai. Last year, Dhall resigned from the NGO to set up MHFC, that combines his social sector and banking experience.
The demand for affordable housing in India is huge as Planning Commission has predicted a shortfall of 25 million homes. "This under-served segment is estimated to represent over 90% of the workforce, but has no financial institution catering to its needs," said MHFC chairmen Madhusudan Menon, in a release.
"Despite the presence of many strong mortgage lenders in India, home loans have have not been easily made available to lower income segments and primary reson for this informal nature of borrowers' occupations," said Mona Kachhwaha, Director-Investments of Caspian Advisors, which advises IFIF, a MFI focused fund.