Lok Capital advised Growth Catalyst Partners (GCP) —third fund from India-focused impact investor— announced on Monday it has led Series A investment of $3.5 million in Ummeed, a Delhi-based Housing Finance company focused on affordable housing in North and Central India.
This is the maiden investment from Lok's third fund. Duane Park is a co-investor in this investment round. The institutional funding will fuel Ummeed's expansion plans as well as boost deployment of technology towards achieving greater operating efficiency, said the VC firm in a statement.
Vishal Mehta, Co-founder & Partner, Lok Advisory Services and Anurag Bhargava of Duane Park will join the board of Ummeed. Alok Prasad, Ex-Mortgage Head at Citi Financials and Ex-CEO of Microfinance Industry Association (MFIN), will also join as a Non-Executive Board Member at Ummeed.
Ashutosh Sharma, founder of Umeed, said: "Families that have semi-formal or informal incomes and comprise the bottom-of-the-pyramid, remain largely under-served by housing finance companies and banks. This is especially true when the loan requirement falls below Rs 10 lakh, making them highly dependent on local money lenders. We want to change this by offering an easier, more reliable option for loans."
"We also realise that technology will give us the leverage to address needs of a large share of this low-income segment. The funding from Lok and Duane Park will help us bolster our technology platform and accelerate our expansion plans," he added.
The potential of the Indian affordable housing finance segment is pegged at Rs 8.8 trillion ($135 billion), according to a Monitor-Deloitte study commissioned by World Bank and the National Housing Bank.
However, the portfolio of existing affordable housing players is only Rs 6,500 crore ($1 billion). As banks and large NBFCs focus towards the formal, higher income segment, an immense opportunity presents itself for startups like Ummeed to develop a sustainable business model in lending to the informal market.
Founded in January 2016 by Ashutosh Sharma, a banker with over 25 years of experience at Citi, HSBC and Bank of Montreal, Ummeed focuses on providing housing finance access to families with low, informal income. The company is backed by a team of ex-Citi Bank professionals, who have expertise in commercial banking, credit and mortgage.
Sachin Grover, the Chief Operating Officer, has over 20 years of mortgage experience at Citi Financials, IIFL and Magma Housing. The operating team consists of professionals with extensive small-ticket mortgage experience at AU Housing, Magma and Shubham.
While companies in the affordable housing space are largely traditional brick and mortar players, Ummeed aims to differentiate itself by leveraging technology to operate its business on ground. Its in-house technology team is building a technology platform for loan origination and loan management. Ummeed aims to go paperless, deploying tablets in all of its branches that can study the customers, run algorithms for credit scoring and disburse loans at a faster pace, said the company.
The company is currently operational in East-Delhi and plans to have 11 branches operating across North and Central India, targeting 1500 customers in the next 12 months.
Lok Capital has identified affordable housing finance as a crucial component of financial inclusion as it creates a stable and long-lasting asset for a family, apart from significantly improving their standard of living. Lok Capital's investment in Ummeed is the third investment in this sector, following earlier investments in Aptus and SEWA Grih Rin.
Vishal Mehta, Cofounder & Partner, Lok Advisory Services, said: "While there is a large unaddressed market in affordable housing finance, to make a significant impact and build an efficient, scalable model, depth of reach is key. Ummeed's approach to marketing with a hub-spoke strategy and a conscious focus to build a technology savvy company will enable this. Ummeed is backed by an extremely capable and credible founding team which straddles superior operating and capital raising experience. We are excited to partner with them."
Ummeed offers customized home loans, ranging from Rs 3 to Rs 25 lakh, to suit a variety of customer requirements including purchase of apartments, construction of homes, home improvements, home extensions and availing loans against property.