Newest Mortgage Financier in India Seeks Conservative Growth
Housing stands beyond electricity lines near the Indirapuram township in Ghaziabad, Uttar Pradesh, India. (Photographer: T. Narayan/Bloomberg)

Newest Mortgage Financier in India Seeks Conservative Growth

India’s newest mortgage lender is in no hurry to catch up in the crowded market.

Instead of aggressively expanding its asset book, Godrej Housing Finance will focus on acquiring 1,000 customers by March to test the sustainability of its systems and processes, said Chief Executive Officer Manish Shah.

“One way to get it wrong is to bite more than you can chew,” Shah said in a phone interview. “Our primary goal is to understand do we have an engine that knows how to onboard customers well, that serves them well.”

The firm, which launched its mortgage lending business last month, is open to buying assets from other shadow lenders and banks in the fiscal year starting in April, he said.

Godrej is entering an industry that was weakened by a credit crunch and slowing loan growth even before the pandemic took hold. Still, housing demand is rebounding as property prices ease and lending rates decline to the lowest in 16 years.

The financier, which is a unit of conglomerate Godrej Group that makes everything from soaps to houses, wants to run a tight ship aiming at a low cost structure, Shah said. He’s seeking a lending margin of 1.5% to 2% and initially focusing on serving buyers of homes erected by Godrej Properties Ltd. and top builders.

In a country where owning a home is a symbol of security and defaulting on mortgage loans a taboo, most lenders are vying for this relatively safe retail segment. Aware of the stiff competition in India’s 21 trillion rupee ($284 billion) mortgage market, Godrej will use multiple pricing scales for customers instead of a few blanket parameters to decide lending rates, Shah said.

“We will have greater differentiation between the lowest and highest interest rates so that we can a do a better job maintaining our spreads,” he said.

The firm is currently funding its loan book from capital infused by parent Godrej Industries. It’s likely to borrow 10 billion rupees to 20 billion rupees through bonds and loans in the next financial year and turn profitable by the March quarter of 2022 at the earliest, Shah said.

©2020 Bloomberg L.P.

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