In an interaction with Kalpesh Dave, Head of Corporate Planning and Strategy, Star Housing Finance Ltd

India's affordable housing finance sector, especially in the rural segment, is a promising area for growth and expansion, expresses Kalpesh Dave, Head of Corporate Planning and Strategy, Star Housing Finance Ltd

What is your outlook on India’s affordable housing finance sector, particularly in the rural segment? What are the opportunities you are focusing on? 

Over the past ten years, the affordable housing finance market in India has grown at a 30 per cent+ CAGR. This is being fuelled by new first-time homebuyer demand from the EWS and LIG segments. To keep up with demand, several low-cost housing schemes have been launched in tier II and tier III cities as well as semi-urban and rural areas. India's affordable housing finance sector, especially in the rural segment, is a promising area for growth and expansion. With a large portion of the population living in rural areas, there is significant demand for affordable housing finance solutions. 

This customer segment needs enabling credit access through formal moneylenders resulting in the development of niche lending institutions in the HFC space. Even in the Covid-19 pandemic, when the overall growth in mortgages had dropped down to single digits, the growth of affordable housing finance companies specifically small-size HFCs has been 15-20 per cent. As India emerges out of the pandemic the green shots have started appearing first in this space. HFCs focusing on this segment shall continue to exhibit super-normal growth over the next couple of decades given the robust demand for housing.

Star HFL has been in the business of providing housing finance assistance to first-time home buyers who wish to purchase/ construct their own homes in the form of low-cost housing units. We have been focusing exclusively on first-time home buyers from the EWS/LIG segment in our operational semi-urban/rural geographies. We have developed catered home loan products for the rural populace for their housing requirements. We shall continue to be operational in our target segment from hereon as we scale up our book through retail home loans. 

Can you shed some light on your Q3FY23 and 9MFY23 results? 

Star HFL has posted record disbursement (Rs 112.96 crore) for the period 9M ending Dec 2022. Total income has registered 80 per cent y-o-y growth for 9M ending Dec 31, 2022. Star HFL has registered 545 per cent y-o-y growth on PAT for 9M ending December 31, 2022, and is now well poised to generate meaningful ROA and ROE for shareholders as the book builds and income gets booked for the entire period from hereon. PAR has reduced as of Dec 2022. This has been achieved through the given implementation of a robust receivable management framework across operational centres. Our strong capitalization levels and moderate leverage levels give us ample headroom to further strengthen liability and build AUM. Utilization of current capacity has resulted in a strong bottom line as the unit cost operating metrics are slowly starting to build and the book is generating income for the operating period. 

What is your AUM growth target for 2023? 

We discussed the milestone figures we are aiming for during this growth phase in our company update and earnings call. Being a listed company, we would not want to provide any predictions, but as a benchmark, we aim to surpass Rs 250 crore AUM by March 31 for the current fiscal year and Rs 500 crore AUM by the middle of the following fiscal year. To enable the achievement of these milestone figures that we have set for ourselves, we are working on the liability side of the balance sheet, both on the borrowing and equity side. 

What is your earnings outlook for the upcoming quarters? Do you expect the high-growth momentum to continue going forward? 

Star HFL, being a publicly listed company, would not be able to give any guidance. But we have set a milestone of becoming a Systemically Important HFC (AUM of Rs 500 crore) over the next 4-6 quarters. On the momentum part, we believe the same to continue further and help enable initiation of building steady state ROTA of 4-4.50 per cent, leverage of 3-3.50x and resultant ROE of 22-25 per cent on a sustainable basis over the next 10-12 quarters.