NBFC’s role in Housing finance: Can Customized &Flexible Loan Offerings Complement “Housing for All” by 2022


New Delhi, October 10, 2019: Housing is a dream and a security for a majority of Indians. With the middle class often striving for right housing finance, NBFCs have been one of the most successful frontrunners in driving the financial inclusion of country. Diversified financial models and customized offerings from V. Vaidyanathan’s Capital First Ltd, Sunil Godhwani’s Religare, S. Viji’s Sundaram Finance Limited have remained exceptional in bolstering the existing market presence.

With rapid urbanization a reality, recent efforts have been to provide “Housing for All” by 2022, where every Indian, rich or poor, has a roof over him head. On one hand where government initiatives such as ‘Pradhan Mantri Awas Yojana’cater tothe underprivileged section of the society, the rich class already owns houses, keeping the middle-class people left out.

Owning a house is often considered as one of the biggest securities or achievements of life in a middle-class society. Thus, people especially in their 40s or 50s decide to construct their dream house, where most of the time, they turn towards the financial institutions for help.

With banks at times less flexible with their policies, other financial institutions such as Non-Banking Financial Companies (NBFCs), HFCs offer good home loan optionsto people. The growth of non-banking financial corporations (NBFCs) in India has given customers more opportunities as they often cater to diverse financial needs. One of the primary factors for the success of NBFC has been its critical role in stimulating the growth of the Indian economy, besides its overall diversified contribution that caters to government’s vision of financial inclusion.

As per the RBI data of FY18, NBFCs and housing finance companies cumulatively met about 20% of the credit needs, in contrast to the banking system which has a mountain of bad loans. Relaxed credit score, higher loan quantum, quick documentation process, customized offerings, doorstep services are some of the qualities that NBFCs offer to a person looking for a home loan.

With their extensive regional reach, NBFCs have enabled the movement of capital in the markets – making money available to businesses and individuals and thus facilitating purchases, particularly in the real estate and gold sector. Furthermore, NBFCs like Capital First Ltd., Religare Enterprises Limited, Sundaram Finance have made a significant mark in the Housing Finance market, through a robust service framework and their services around home-purchase, home construction and home improvement loans.

There are quite a few examples in this context, with one being Religare housing development finance corporation limited. As a part of the significant development for the Religare Group, its former Managing Director Sunil Godhwaniin the year 2006 decided to extend its set of services by includingthehousing finance. “Understanding the future market and building the financial opportunities that cater to the housing sector or any other sector is what NBFCs should do. Gauging those who’re traditionally underserved by the banks will help improve the economic structure of the country,” says Sunil Godhwani.

Similar strategic initiatives in regards to offering housing financial services can also be seen in S Viji’s Sundaram Finance Limited, V. Vaidyanathan’s Capital First Ltd— expanding and upgrading the existing market presence.

From delivering better loan facilities to providing higher loan quantum, some of these factors have been the genesis behind NBFC’s success story. With 2022 just 2 years away, there exits immense pressure on the country to provide stable housing sector.The banking sector would always be the most important sector from the economic perspective, given its credibility in supporting manufacturing, agriculture finances and even being the common man’s money.

But in spite of that, the role of NBFC will continue to remain critical, given its diversified financial approach and easy customized loan offerings. Thus, the efficient contribution from both banking and NBFC is a must. The right approach could make the “Housing for All” by 2022 a reality, however what matters is how NBFC sector caters to prospective financial market demands and inclusive growth of the nation.