In conversation with Manoj Viswanathan, Managing Director and CEO, Home First Finance Company India Ltd

With the customer at the core of its every operation and using technology to make the processes smooth and convenient, Home First Finance has achieved several milestones, says Managing Director and CEO Manoj Viswanathan in this exclusive interview

What is your outlook on India’s affordable housing finance sector?

First, we need to understand the macro numbers related to housing. The mortgage to GDP of India is very low today versus China and developed countries. Today, India’s mortgage to GDP is 11 per cent as against around 30 per cent in China and 65 per cent in USA. As we have observed in other countries, India’s mortgage to GDP is also expected to benefit from rising per capita income. India is today at a stage where the USA was in the year 1970. The housing finance market has displayed a CAGR of 16 per cent over the period of fiscal 2015 to fiscal 2021 whereas the affordable housing finance market has shown a growth of 10 per cent during the corresponding period. The primary driving forces of the significant increase in the home-buying population are urbanisation and nuclear families.

If you combine that with GDP growth, an increase in per capita income and lower interest rates that lead to better affordability of homes, then the demand for homes is likely to be very high. As per the Reserve Bank of India’s House Price Index, the growth in housing prices has been near zero since 2017. Within the affordable housing space, the opportunity is very large and will span multiple decades. According to the credit bureau, the size of the affordable housing market was Rs 9.2 trillion in the fiscal 2021 and there is a new demand of approximately 2 million units per year. It is expected that the affordable housing finance segment will grow by around 10 per cent CAGR and double in size by FY27.

Home First Finance reported a multifold jump in its net profit to Rs 46 crore for Q3FY22 along with the highest ever disbursals of Rs 570 crore. What factors have contributed the most to help you outperform?

Our strong numbers were led by the normalisation of the economy in the post-pandemic period. The growth in profit after tax is due to a higher asset base, consistent spreads and a lean operating structure. We expect further improvement in numbers once the economy normalises from the impact of the pandemic. Regarding business growth, we are witnessing strong demand in our segment on the ground and it is across all the geographies where Home First Finance is present. We are also expanding our network and our ambition is to cover all the remaining areas of the states we are present in. We plan to double our touch-points from the current figure of 187 to around 350 in the next couple of years. Meanwhile, smart usage of technology has helped us build a scalable operating model. The objective has always been to simplify the home loan process for first-time homebuyers and provide them with excellent service through state-of-the-art technology adoption.

Home First Finance’s AUM crossed a milestone of Rs 5,000 crore in January 2022. What is your AUM growth target for the upcoming months?

Yes, this is a significant milestone in our journey. It took us a little over a decade and we have provided housing loans to more than 60,000 customers across 13 states and Union Territories in the country. We are grateful to our employees, customers, business partners, regulators, shareholders and the media for placing their faith in us and encouraging us through our journey. Our AUM and disbursement numbers have been consistent. From the year 2017 our AUM has grown over 45 per cent year-on-year. We want to grow our AUM at 30 per cent per annum in the medium term. We are on track for the same.

Can you shed some light on how digital adoption has improved on your online platforms since the beginning of FY22? What are your plans to further expand your physical and digital presence in the next 2-3 years?

We continue to invest in technology and for us investment is largely in terms of getting technology specialists on board. A lot of the technology that we use is not very expensive. It’s more about adapting the right type of technology and putting it to use. So, some of the things that we have introduced like e-onboarding initiatives, which consist of electronic stamp papers, the e-NACH process and electronic signatures process, help in saving time for the customer because the customer can carry out these processes remotely from his or her residence. We plan to double our physical presence from 76 branches as of December 2021 to about 140-150 branches by FY24-25 and total touch-points from 187 to 350 in the same period.

Over the years, we have made our systems more robust and constantly added meaningful features to enhance the customer experience – the latest being the addition of biometric login in our mobile app which greatly enhances the security for our customers. Also, we are delighted to see digital adoption improve significantly. Usage of the customer app for various activities has increased. Up to 76 per cent of our customers are registered on our app as of December 2021 compared to 72 per cent in September 2021. Our e-onboarding initiatives have been received well with e-stamp adoption in 55 per cent of the loans, e-NACH in 50 per cent of the loans and e-sign in 18 per cent of the loans in December 2021.

What are your growth levers?

The affordable housing finance sector remains one of the most resilient segments, validated through better collection efficiencies and asset quality compared to other segments. A technology-led approach, pan-India distribution driven by strategic market selection and expansion in contiguous markets, a scalable operating model built on holistic technology usage and superior branch productivity have acted as our growth levers. We will continue to have superior productivity metrics compared to our peers in terms of per branch or per employee comparison. Operating leverage, better ratings from credit rating agencies and normalisation of credit costs will help us achieve profitable growth going forward.

At the moment, what are your top three strategic priorities?

Our top three strategic priorities for the next few years are to expand our branch network in large affordable housing markets which would lead to doubling our touch-points to 350, leveraging technology-driven operational efficiencies, diversifying technology-driven sources of borrowings to optimise borrowing cost and grow the productivity of the existing branches. We believe these priorities will place us in a leadership position within the affordable housing segment and drive return on equity (ROE) to sustainable levels of 16 per cent and higher.