Sundaram Home Finance plans foray into affordable housing

Sundaram Home Finance Ltd. (SHFL), as part of its expansion programme, is planning to enter into the affordable housing segment during the current fiscal, said a top official.

“Like the newly started Small Business Loan [segment], we will try to get into affordable housing segment by starting a pilot in Tamil Nadu,” said D. Lakshminarayanan, MD during an interaction.

“Hopefully, it will happen during the next quarter. It is still in the drawing board. We are planning to lend up to ₹35 lakh as per the criteria laid down for this segment,” he said.

The affordable housing market is roughly ₹90,000 crores – roughly about 5-6% of overall housing market. It is growing fast at the rate of ~15-16%.

According to Mr. Lakshminarayanan, the new activity will be a natural extension for SHFL as it already provides home loans, home improvement loans, home extension loans, top-up loans and plot loans accounting for 68% of total disbursement of ₹3,978 crore in FY23. Hence, SHFL feels it would grow faster in the affordable housing segment than the SBL segment.

The target customers are mainly the salaried class and self-employed from Tier-II and Tier-III cities. “There is a keenness among youngsters to own a house in small towns. While the interest rate hikes had impacted the affordable housing segment, the long-term outlook for this segment is positive and is poised to grow well in the coming years,” he said.

The housing finance arm of City-based NBFC Sundaram Finance forayed into SBL during October 2022 and opened 10 branches in Tamil Nadu in the first six months. It plans to open 10 more branches this fiscal in Tier-III and IV cities.

Asserting that the company is aiming for 25-30% growth in overall disbursements over last year and 15% growth in Assets Under Management of ₹11,005 crore, he said it will be done by deepening presence in the southern market.

Explaining further, he said that the company is witnessing recovery in the housing market across the board, in all segments and geographies it is present in. Multitude of rate hikes has not dampened the buying sentiment and demand remains strong and this augurs well for the housing sector, he added.

“The concerns on inflation have eased. There is now a stability in interest rates. From a housing perspective, the structural drivers underpin growth in small towns,” he said.

During FY24, SHFL will be opening around 15 new branches in Telangana, Andhra Pradesh and Tamil Nadu and five elsewhere. Plans are on to hire around 300 people across SBL and prime lending business.

With regard to Gross Non-performing Assets, he said it stood at 2.5% of total advances and were aiming to bring it down further. Collections remained at a healthy 95% and slippages were minimal.