Ajay Piramal, Chairman at Piramal Enterprises Ltd. reacts while adressing media at a conference in Mumbai, India. (Photographer Anirudh Saligrama/BloombergQuint)

Piramal Group Forays Into Housing Finance Business

The Piramal Group launched a housing finance business as it bets on growth for home and construction loans in Asia’s third largest economy.

The real estate-to-healthcare group’s financial services arm floated a wholly owned subsidiary, Piramal Housing Finance Ltd., with an initial paid-up capital of Rs 1,000 crore, Chairman Ajay Piramal announced on Wednesday. It will initially focus on metros and then move to other parts of the country.

The group aims at targeting salaried and self-employed customers to provide home loans. The housing finance arm will also provide loans against property and construction finance to small developers. It will leverage the Piramal Group's relationship with real estate developers to provide loans to their customers, Piramal said.

Through our experience of investing in the Shriram Group businesses of over four years, we are sure we will be able to successfully target self-employed borrowers.
Ajay Piramal, Chairman, Piramal Enterprises
Piramal Enterprises Chairman Ajay Piramal at the launch of Piramal Housing Finance in Mumbai. (Photographer: Vishwanath Nair/BloombergQuint) 
Piramal Enterprises Chairman Ajay Piramal at the launch of Piramal Housing Finance in Mumbai. (Photographer: Vishwanath Nair/BloombergQuint) 

The construction finance business will focus on local developers in Tier 1 cities and top developers in Tier 2 and Tier 3 centres. The group plans to target loans in all categories, along with affordable housing.

The housing finance arm, which started its operations three weeks ago, already has assets under management in excess of Rs 200 crore and aims to build a book of Rs 15,000 crore by 2020, said Piramal.

Shares of Piramal Enterprises fell as much as 0.4 percent to Rs 2,671 apiece, their fourth straight decline.

As on June 2015, housing finance regulator National Housing Bank had licensed 65 housing finance companies to conduct business. Add this to the nearly 40 listed banks in the country, and there more than 100 institutions willing to finance home buyers.

But Piramal believes that the space is not as crowded as it is made out to be. There are only 10 housing finance companies with a loan book of over Rs 10,000 crore and 16 companies with a loan book higher than Rs 5,000 crore, he said.

This means that while there were many companies which had started in the business, not many have managed to grow it, Piramal said, adding that considering the large demand in housing finance, there was adequate space for his group to consider launching a new business.

At the end of July, the outstanding bank loans to the housing finance segment stood at Rs 8.63 lakh crore, forming a little more than half of the Rs 16.65 lakh crore retail loan portfolio of scheduled commercial banks.