Affordable housing market in India is valued at $300 billion: Basic Home Loan founder Atul Monga

After the pandemic, affordable housing has taken centre stage in India’s real estate market. This sector’s growth is ignited by several factors, including the entrance of numerous real estate developers, the availability financing alternatives for potential home buyers, rapid urbanisation, the increasing trend towards nuclear families, and higher income levels, Atul Monga, Founder of Basic Home Loan, tells BT Money Today’s Navneet Dubey. 

Monga emphasises the affordable housing sector’s increasing visibility, which is primarily aimed at households within the lower to middle-income range. These targeted demographics are determined based on precise pricing and eligibility criteria, ensuring affordability for prospective buyers. The affordable housing sector in India has become an enticing avenue for real estate developers, attracted by the potential for significant returns on investment while simultaneously fulfilling a crucial social need. 

BT: How big is the affordable housing market in India? Where does it stand vis-à-vis mid- and high-range segments?   

AM: The affordable housing market, valued at $300 billion, is well-suited for individuals with low to middle incomes. It presents lending opportunities in which financial institutions offer customised solutions, benefiting both developers and buyers within this expanding industry. 

The affordable housing sector in India has recently attracted considerable attention. It specifically targets households falling within lower to middle-income brackets, as defined by specific pricing and eligibility criteria. Affordable housing has exhibited significant growth, thanks to numerous government initiatives and incentives designed to support it. In contrast, the mid and high-range housing segments primarily cater to more affluent clientele. While these latter segments play a vital role in the real estate market, affordable housing is often regarded as a key catalyst for overall housing development due to its far-reaching societal impact. 

BT: What’s the market size? How do you see it evolving in India? Where do you feature in this scheme of things? 

AM: The home loan market in India is valued at approximately $600 billion, presenting significant opportunities for BFSIs, banks, HFCs, and NBFCs. This market is experiencing a steady growth with a Compound Annual Growth Rate (CAGR) of 15%. Factors such as population growth, urbanisation, increasing incomes, and government initiatives like PMAY and interest subsidies are driving the demand for home loans in the country. 

Affordable housing constitutes a substantial and dynamic segment within India's real estate industry. While specific figures may fluctuate over time and across different locations, they remain a noteworthy component of the market. Government policies like the Pradhan Mantri Awas Yojana (PMAY) have propelled this sector forward by offering subsidies and incentives to both developers and buyers. Collaboration between the government and private sector is expected to further shape the market as they address the housing needs of a growing population. Fintech companies have a crucial role to play in this landscape by providing accessible and affordable financing solutions for prospective homebuyers. 

BT: Prime Minister Narendra Modi hinted at a new scheme for urban centres on the lines of affordable housing. What are your views on this?

AM: Prime Minister Modi’s emphasis on affordable housing reflects the government’s commitment to providing housing for all. Introducing new schemes aligned with affordable housing is a positive step, as it can help address the housing shortage in urban areas. There is indeed untapped potential in urban centres, as these areas often face more acute housing shortages and price escalations. By addressing this need, the government can promote inclusive growth and better living standards. 

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BT: What are the challenges that you face as a company, and in the sector?  

AM: Prior to introducing affordable home loans, we encountered hurdles in evaluating both income and property details. In the realm of affordable housing, numerous borrowers exhibit irregular income patterns or lack formal documentation, leading to intricate income assessments. The absence of a centralised income database compelled us to depend on physical documents and manual verification procedures, resulting in time-consuming processes and heightened risks of errors and fraud. Similarly, property evaluation posed challenges, necessitating physical inspections for each property due to the absence of a comprehensive property database. This led to resource-intensive and time-consuming procedures, especially when dealing with a high volume of loan applications. 

BT: How do you as a fintech, ensure the safety of customer data while increasing digital access to lending services? 

AM: In terms of governance, although there are no specific government mandates, we uphold rigorous data privacy and security protocols. As part of our background verification process, we rely on secure platforms recognised by the Indian government, namely Aadhaar cards and Digi Locker. These tools enable us to validate and authenticate customer information, ensuring a dependable and trustworthy lending process. 

Our governance framework places a strong emphasis on adhering to relevant regulations and industry norms. We treat customer data with the utmost confidentiality and care. Our systems and procedures are meticulously designed to safeguard customer information, preventing any unauthorised access or breaches. We [as an industry] follow industry-leading practices to guarantee the security and integrity of customer data throughout the entire loan application and approval process. 

Furthermore, our governance practices underscore transparency and equitable lending principles. We give customers clear and precise information regarding loan terms, interest rates, and associated fees. We believe in arming customers with the knowledge they require to make well-informed decisions about their home loans.