Awaiting clearance from regulator, Shriram Housing Finance, a start-up of Shriram group, expects to have a play in the sub-Rs 10 lakh home mortgage category in tier-II and tier-III cities. SHF is promoted by the non-banking finance company Shriram City Union Finance.

Mr Sujan Sinha, Managing Director and CEO, Shriram Housing Finance, said the target audience would be people who are underserved by organised financial institutions.

Shriram group caters to various financial needs of these customers such as gold jewel loans, asset financing, consumer durable loans, small and medium enterprise loans. The group has about two million borrowers as customers.

SHF is awaiting clearance from the National Housing Board to start operations. The company expects to kick-start operations from July 2011 and would focus on Tamil Nadu and Andhra Pradesh initially and then move to other regions.

Asked about the challenges for a start-up with interest rates hardening, Mr Sinha said over the last few years, the mortgage rates moved from a ‘sub seven per cent' level to close to 11 per cent and again oscillated back to single digit rates. So, the market is by now pretty adaptable to rate changes.

“I do not think that comparatively higher rates would be a major hindrance for credit off-take”, he said.

He said that cost of homes has a much greater impact on demand, as opposed to mortgage interest rates. Mr Sinha has been involved in the retail finance market for more a decade.

Big challenge

Mr Sinha said it will be a great challenge for the company to dig in and make a name for itself in the realty industry where there is intense competition. Another issue the company would have to deal is the lack of uniform, pan-India land-laws and revenue regulations.

However, the positive side is that Shriram group is aware of the reality and have a very long history of working with people who are not catered to by organised financial institutions, he said.

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