OPERATING ENVIRONMENT

Promising market opportunities

During the times of the COVID-19 pandemic, the financial sector encountered difficulties such as limitations on travel and the collection of funds from centralised markets. However, by successfully recognising emerging market opportunities and capitalising on them, we were able to drive a robust financial performance for our Company.

LOWER MORTGAGE PENETRATION

India has a relatively low mortgage penetration rate compared to other countries, with only 10.5% of its GDP being contributed by mortgages in FY23. However, the real estate market is expected to see growth in the long term, which will lead to a boost in the housing finance sector. As a result of various factors, such as the rapidly growing middle class, rising disposable income, and urbanisation, the home loan market in India is expected to grow by 14% in the near future.

RISING DEMAND FOR AFFORDABLE HOUSING IN INDIA

In FY23, India faced a significant housing shortage of 100 million units, leading to the introduction of several impactful policies. These initiatives, such as Pradhan Mantri Awas Yojna, Credit Linked Subsidy Scheme, Housing for All, and the Resolution Framework, show the government’s unwavering commitment to addressing the housing shortage in the country. The affordable housing segment also received a significant boost from the government in Budget 2023-24, with an increased allocation of `79,000 crore, which is a 66% increase from last year. The finance minister also provided tax relief to the working middle class by implementing revisions to the tax structure. The sector has been experiencing robust growth in recent years and is expected to maintain its momentum in the future.

SHIFT IN BUYING NEEDS

The COVID-19 pandemic caused many people - who were previously living in rented homes - to become more cautious about their living conditions and prioritise their families’ safety. Additionally, with more people working from home, the need for larger, more private spaces became increasingly important, further contributing to the growth of the real estate market. Some even bought homes as a source of additional income by further renting them out. The government’s affordable housing scheme also led to a shift in buying patterns, as people were able to find more reasonably priced options in the market.

IMPACT OF DIGITALISATION

As digitalisation became more widespread, organisations in different industries started using digital tools. Housing Finance Companies (HFCs) are using these advanced digital tools to make the entire customer journey smoother and seamless. Additionally, the use of advanced analytics, data sciences, machine learning, and artificial intelligence is speeding up the process of screening customers during underwriting, resulting in a faster turnaround time. These tools are also helping organisations to improve credit profiling, collection, and recovery processes while reducing costs.

OUR RESPONSE

Drawing from our deep understanding of the external environment, we have taken decisive measures to capitalise on the opportunities available in the market.

  • Efforts have been focused on accelerating growth through the retail segment. Further, we are expanding our presence in the retail segment through the establishment of affordable housing branches in tier II and III cities.
  • We have improved our underwriting process and streamlined our collection efficiencies by implementing digital tools to enhance our operational efficiency.
  • Furthermore, we have enhanced the capabilities of ACE – our digital onboarding platform for customers.
  • Focus on increasing collection efforts to reduce the Gross NPA
  • Realignment of our teams and processes to achieve our goal of growth on loan assets with a focus on the retail segment, growth in the affordable segment and asset quality improvement.