Image: Joshua Navalkar
The Piramal Group, which has been a lender towards real estate projects, has ventured into housing finance, its chairman Ajay Piramal announced on Wednesday. This comes at a time when the sector – which is a crowded space in India with over 80 housing finance companies -- is yet to witness a clear pick-up in demand.
The company, Piramal Housing Finance Ltd, which acquired its license in September this year, has already built assets under management (AUM) of Rs 200 crore in the first three weeks of operation for its latest line of business and aims for AUM of Rs 15,000 crore by 2020.
Piramal is, however, confident that there is enough opportunity for the newest housing finance company on the block to grow and also make a difference. This is, according to him, because of favourable factors – 1/4th of the 25 crore Indian households still face a housing shortage and India’s mortgage market remains highly underpenetrated. [According to 2015 data, India has a mortgage to GDP ratio of 9 percent, which is extremely low when compared with 75 percent in UK, 68 percent in the United States and 18 percent in China.]Piramal plans to adopt a slightly different model, the B2B2C model – business (Piramal Housing Finance) to business (property developers) to consumers (loan buyer), to sell its products. The home loans will be pushed through the relationships with developers that Piramal Finance has already built and are in place through its wholesale lending.
Ajay Piramal will also leverage Brickex, an in-house distribution arm operating in Tier 1 cities, which has access to over 10,000 distributors and provides market intelligence and support to source customers.
The new entity will operate with a paid-up capital of Rs 1,000 crore but Piramal said, being a 100-percent subsidiary of Piramal Enterprises Ltd (PEL), there would be no constraints to funding or even capital raising at a later stage. PEL, which has a strong presence in real estate developer financing, has a loan book of Rs 24,924 crore, as on June 30, 2017.
PEL's stock ended down 2.76 percent at Rs 2,609.15 apiece at the BSE on Wednesday.
PHF will not limit itself to specific ticket size for its loans but indicated that loans would start from upwards of Rs 20 lakh. The Shriram Group, in which PEL has invested Rs 4,583 crore, also operates in the housing finance space through Shriram Housing Finance; but it sells loans of a smaller ticket size, particularly in rural India.