Ignored by large banks, rooftop solar project developers are offering finance to customers from their own books, in addition to tying up with NBFCs to meet the upfront costs.
According to Maxson Lewis, director of rooftop solar developer Magenta Power, the need for upfront payment is one of the biggest constraints for the growth of the rooftop solar sector. “The concept is new and for people to put money upfront is difficult,” he said.
A typical 5 Kw solar rooftop system for residential consumers costs around ₹2.5-3 lakh.
“We are getting about 75-80,000 new queries on our digital platform every month, but the conversion is very low,” Gagan Vermani, founder and CEO of Noida-based Mysun, told
“Customers today do not understand the difference between a good solar system and a bad one because on paper everything looks similar, and unless you can build a brand, you still have to offer them something more – and financing becomes such an enabler,” he added.
Mysun has been providing loans for solar projects for residential and industrial customers for around 10 months now. “In the retail segment, we have funded about 30-odd projects by providing them a loan, which is on our balance sheet, and it has been quite successful till now without a single default,” said Vermani.
In the industrial segment, the company has funded a ₹1-crore project, and is planning to fund another project for ₹3 crore, in partnership with “a well-known NBFC”.
Sunvest Energy is another rooftop solar developer that is in the process of finalising a deal with an NBFC to fund rooftop solar projects, Sishir Garemella, Founder & CEO, told BusinessLine . “Developers, such as Sunvest, have been very close to the customer and the asset deployment, to appreciate the practical issues on the ground; hence, they can build a robust financing solution,” he said.
Magenta Power, too, is now in talks with several NBFCs to finance rooftop solar projects as banks are not willing to lend.
Banks’ worries
A small-ticket size and uncertainty over the quality of the rooftop solar systems in the long term are some of the reasons preventing large lenders from opening up to the sector, Vinay Rustagi, Managing Director of renewable consultancy Bridge to India, told BusinessLine .
“This is a sector with very low entry barriers, and hence, a large number of players have entered with everyone driving prices down; therefore, the quality is compromised. The financiers prefer larger-ticket sizes and standard products with assured quality. The problem in rooftop solar is that there are literally hundreds of equipment manufacturers and thousands of installers,” he said.
Queries sent out to at least 10 banks, including large public sector banks – SBI, Bank of Baroda, Union Bank – and private sector banks, such as HDFC and Kotak Mahindra Bank, as well as several NBFCs, were not answered.
Over the past two years, the government has also secured several large credit lines from World Bank, Asian Development Bank and Germany’s KfW for the rooftop solar sector to be channelled via India’s PSU lenders. However, according to Rustagi, only a portion of these funds have been actually sanctioned, with only AA or AAA-rated corporates becoming the recipients of these funds, leaving small industries and residential consumers out of the picture.