Sundaram Home Finance will get into the affordable housing segment, looking at disbursing loans of up to Rs 35 lakh in the smaller towns, a top company official said.
“This is a natural extension of what we have been doing since inception,” Lakshminarayanan Duraiswamy, managing director of Sundaram Home Finance, told Moneycontrol. “Focusing on the retail customer segment in tier-2 and tier-3 towns is an integral part of our growth plans.”
The government’s stated intent is to focus on smaller customers in the affordable housing space, he said.
“We understand this space well and are well-positioned to leverage the opportunity that this segment presents. This segment has the potential to be a fast-growing one for us in the long-term,” said Duraiswamy.
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The entry into affordable housing comes in the wake of the Chennai-based company’s diversification into small business loans in October last year.
Duraiswamy said Sundaram Home Finance will open about 10 branches in small towns in Tamil Nadu and Andhra Pradesh. It plans to hire 50-75 people by March to exclusively handle loan disbursals for the affordable housing segment.
Sundaram Home Finance posted a 21 percent increase in net profit to Rs 57 crore in the first quarter ended June and loan disbursals of about Rs 1,104 crore. The wholly owned subsidiary of Sundaram Finance Ltd. has set a conservative disbursal target of Rs 10 crore in the affordable housing segment by March 2024.
Poised for growth
“The company's strong disbursement growth in the last year or two has been driven by business in tier-2 and tier-3 towns," Duraiswamy said.
Affordable housing as a segment is set for strong growth, driven by rising income levels in cities and towns beyond the metros. They also now have access to quality financing, enabling them to purchase homes.
“Our ability to understand and underwrite self-employed customers in remote towns will be a differentiator as we venture into this segment,” Duraiswamy said. “Tier-2 and -3 towns have shown resilience even during the pandemic, as seen from our overall growth being driven by business from these markets over the last couple of years. Their ability to pay has improved in recent years and their good credit track record is testament to the fact that there are quality customers in these geographies.”
The government, in its budget for FY24, allocated Rs 10,000 crore per annum through a fund to help establish quality urban infrastructure in tier 2 and tier 3 cities. This in turn is expected to result in higher demand for housing and commercial real estate.
Residential sales reached a 15-year high of 126,587 units in the first half of 2023, marking a 21 percent increase from a year earlier, according to a report by Jones Lang LaSalle dated August 21, 2023. The share of affordable apartments priced below Rs 50 lakh declined to 19 percent in H1 sales from 24 percent in H1 of 2022.
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