Non-banking finance company (NBFC) Karvy Financial Services is planning to set up a housing finance entity. The lender is yet to take the required regulatory approval but is looking at doing so in the next financial year.
“We are looking at adding a housing finance company that will focus on low-cost housing that includes the affordable housing segment. This will typically include loans up to Rs 10 lakh,” said Amit Saxena, managing director and chief executive officer.
Though it has started providing individual home loans, the firm is looking at setting up a separate company as the cost of funds that it can tap through the National Housing Board is lower, Saxena said.
According to rating agency ICRA, the overall market size of the affordable housing segment stood at Rs 67,800 crore at the end of the last financial year. The portfolio of new players in the segment stood at Rs 6,500 crore as on March 31, 2015. ICRA said this segment could continue to grow at a compound annual rate of 50 per cent over the next three to five years.
With the growth potential available in the segment, several banks are also focusing on this category. But, Saxena said they were unfazed with the rising competition. “Banks generally do not focus on loans of such small-ticket size. Moreover, we already have an existing business and over 80 branches and a deep distribution network, so I believe we will be fairly competitive,” he said.
At present, the majority of it’s business comes from loans against property which constitutes about 70 per cent of its loan books. Apart from this, the lender is also present in the gold loans, business loans and small commercial vehicle loans segments. However, it has decided to stay away from consumption loans, personal loans and two-wheeler loans.
However, considering the company already provides loans against property, the lender believes it would not be very difficult to break into the individual home loan segment as the parameters of the business broadly remain the same.
Saxena said that going forward the company would also look at applying for a small finance bank licence once the Reserve Bank of India announces the “on-tap” licensing regime, which will allow players to apply any time.