There’s huge unmet demand for affordable housing, says Muthoot’s Srivastava

Muthoot Housing Finance Company has set ‘affordable housing’ as its target segment now. There is a huge unmet demand in this space and this is a good space to be in, said Maneesh Srivastava, Chief Executive Officer.

Muthoot’s typical home loan client is your grocer, barber or mason or any self-employed individual. They are mostly in an occupation that does not allow them to visit a bank multiple times for following up on a loan proposal.

The unique selling proposition for Muthoot is to be able to go to the customer’s location, in the process providing both convenience and easy access to housing finance. And since the client is not someone who can provide a salary slip or an IT return — a lot of documentation is informal and intelligent guesstimates have to be made about the income levels.

That necessitates a visit to the customer’s premises, which is often far away from the centre of town and, therefore, entails higher logistical costs. The average loan size is around ₹6.50 lakh, and interest rates vary between 13.5 per cent and 16 per cent per annum.

Non-performing asset levels are at 2.4 per cent and, understandably, higher than levels normally seen in other housing finance companies that cater to the more affluent sections. Srivastava points out that a difference of 75 basis points has to be factored in given the difference in clientele.

Any emergency or dip in business can delay repayments since these strata do not have much by way of savings, he said. But the desire to have one’s own home is deeply entrenched in the social strata they hail from and, therefore, the credit risk is of a manageable nature, he adds.

Borrowers typically move from a run-down establishment, with peeling paint, erratic water supply, leaky roofs and uneven floors to a better-equipped flat – even if it is only 400 square feet big. The change in the quality of life that Muthoot Housing Finance Company can be instrumental in providing is a rewarding experience, said Srivastava who helped set up the company after working for over a decade at HSBC and earlier with Blowplast.

Muthoot Housing Finance plans to double its branch network to 40 in the eight States (Gujarat, Maharashtra, Kerala, Tamil Nadu, Rajasthan, Uttar Pradesh, Madhya Pradesh and Karnataka) it is currently operating in.

This will be done over the next two years. The company has so far provided loans to about 7,000 borrowers and its outstanding portfolio is currently at around ₹400 crore. The company plans to disburse about ₹200 crore this fiscal.

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