Piramal Enterprises has closed the gap in its real estate lending business by launching a new housing finance compa ny on Wednesday. In an interview with Megha Mandavia and Saloni Shukla, chairman of the Piramal Group Ajay Piramal said that the new housing NBFC will be targeting a home loan book of Rs 15,000 crore by 2020, and will bet on the salaried and self-employed to grow its loan book. Edited excerpts:
You have already received a licence from the National Housing Bank, how have the initial days been?
We have just started the housing finance company. In the 20-odd days that we've got the licence, we have got `200 crore worth of loan book, and expect it to touch `15,000 crore by 2020, so it tells us how big an opportunity it is. We have funded homes in 30 different projects.What's important is we have already got 150 employees for housing finance; we have a senior management team with an experience totalling 100 years.
We have opened a branch in Goregaon (Mumbai), starting one in Thane next week, and have tied up with 50 DSAs (Direct Selling Agency). Just as we became one of the largest players in real estate wholesale finance, we want to replicate that in retail loans as well.
The housing finance market is very crowded, how would you distinguish yourself?
Yes there are more than 80 housing finance companies. Even I thought that it is such a crowded space: the rates are falling every day, why should we enter? But the pull started from developers, they were persuading us to do housing finance.
We used to think that it is a B2C business but that's not true, the developer has a key role to play here.They found that many housing finance companies did not understand this. Sanctioning a loan took such a long time; it has frustrated customers, and delayed construction of projects. We spent a lot of time understanding this space.
So, what has your study thrown up?
When we studied in detail, we realised that there are only 10 housing finance companies with an AUM of more than `15,000 crore, and 16 with an AUM of more than `5,000 crore. And even in this AUMs, it's not just pure housing finance loans, it also includes construction finance and loan against property. It is a large market, but there aren't many real players.
We also realised that every year, the DSA wants to switch loans from one company to another for a fee.We are also using our company BrickEX which is doing broking in the real estate space. They have connections with 10,000 DSAs in this country. They have an affinity to us and won't shift.
How would the funding work out?
The funding today comes from the balance sheet of Piramal Enterprises, as the housing finance company is a 100% subsidiary of PEL. And PEL uses many ways of funding: we have access to bonds, bank finance, we will raise equity as and when required.
The government has a lot of thrust on affordable housing. How much of your focus will be on this?
The big change I am noticing is that even large developers who till recently never thought of affordable housing are considering it seriously. The fact that there's interest subvention, you also get tax relief -it is a huge market and approvals are also easier, and these things are driving developers towards affordable homes.
What is the customer base that you are targeting?
It will primarily be in two areas -the salaried and self-employed which needs a different way of lending.Remember we have invested in the Shriram Group since the past four years and this is the expertise we also get from there. Our people were working with Shriram and that is where we have understood what it takes to lend to the self-employed without making mistakes. We are using the latest technology, so underwriting is better, risk is less and turnaround is better, so customers can see better efficiency.
Would you look at acquiring loans from smaller players?
I don't think we need to acquire loans because I believe that with our deep relationship with developers and our understanding of the market,we can make a sizeable loan book on our own.
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