Godrej Housing Finance is the latest entrant to the competitive home loan lending space. It commenced operations from November 2020. At present, the company finances only Godrej Properties’ customers in Delhi, Mumbai, Bengaluru and Pune. In the next quarter, the company is looking to offer loans to other developers as well. Interest rates start from 6.69 per cent for salaried borrowers. Manish Shah, MD and CEO of Godrej Housing Finance spoke to Moneycontrol’s Hiral Thanawala on why the company’s focus is on select cities. Shah also talks about the roadmap ahead. Excerpts:
Why do you limit financing only to Godrej’s projects? And why have you restrict yourself only to four cities?
Limiting ourselves to Godrej Properties in the initial stages has allowed to test our systems thoroughly. But in the next quarter, we will extend loans to other developers as well. We will expand our developer partners. However, interest rates remain the same for customers with similar risk profiles, even if they apply to non-Godrej properties. In the second half of the year, we would start the loan against property business.
We restricted ourselves to these four cities because that’s where a bulk of our existing and new projects are located. For us, these four cities offer plenty of business. Lending to non-Godrej properties will also be focused on these four cities for the next one quarter.
Your firm was started right in the middle of the pandemic. Why?
It’s not that we started operations just because home loan rates are low and demand from retail borrowers is up. We had begun our planning to launch this housing finance company a couple of years ago, but it got delayed due to COVID-19. Also, recent RBI regulations are a welcome move, as they would help housing finance companies such as ours to focus only on lending to retail customers for home loans.
How is Godrej Housing Finance different from other banks and housing finance companies?
We will offer flexibility. For instance, our parallel funding offering aims to ease the burden of down payment. Customers can split the down payment into smaller, more comfortable amounts, if they wish. They can be paid depending on construction stage of the home.
COVID-19 resulted in lost jobs or income reductions. Our EMI-break feature allows customers to avail breaks for three predefined-EMIs within their first three years. This is conditional. This is something like an EMI moratorium. It won’t affect their credit score as it’s an in-built product feature.
Further, we use digital technology to enable loan disbursals directly to builders upon their project completion stages. Usually, this is a manual process where home loan customers have to keep a track of their project completion and then inform the bank. Also, our home loan sanction process is digital. Borrowers only meet us when it’s time to sign document after loans have been sanctioned.
You offer loans starting from 6.69 percent for the salaried. Is this intentional to gain borrowers attention?
Business is competitive. And home loan interest rates are at a multi-year low. As a late entrant, we have to compete aggressively.
How long will the low-interest rate environment continue for home loans?
Interest rates are unlikely to go down any further. It’s the best time to lock into home loans at these interest rates. There will be wider spreads of interest rates for highly credit worthy customers – the rate will be quite low for the most credit worthy borrowers.
The factors that could lead to a rise in the interest rates are increasing cost of funds for the lender, inflation going up and the RBI deciding to increase the repo rate.