by VENKATESH KANNAPPAN, MD & CEO of Aham Housing Finance
Housing Finance Companies (HFCs) in India have achieved significant success in promoting home ownership in recent years. HFCs serve a broad range of borrowers, providing affordable housing finance to fulfill their dream of owning a home. However, their journey towards success has not been a smooth one. This article explores the factors that have contributed to the improved success rate of HFCs in India.
Regulatory Measures
In the early years, HFCs in India struggled with quality loan book management, lack of transparency, and inadequate risk management. These issues led to high delinquencies and Non-Performing Assets (NPAs), impacting the sector's credibility. Regulatory measures were established to ensure that HFCs complied with similar standards as banks. As a result, HFCs in India have maintained a healthy loan book quality with lower NPAs than Non-Banking Financial Companies (NBFCs).
Government Initiatives
The Indian Government has introduced several initiatives, such as Pradhan Mantri Awas Yojana (PMAY) and Credit Linked Subsidy Scheme (CLSS), to increase the availability of affordable homes for all segments of society, positively impacting HFCs' operations. These initiatives have enabled HFCs to expand their customer base and improve their business operations.
A Strong Team
HFCs require a competent team of experienced professionals and adequate human capital to foster effective communication and collaboration. This facilitates decision-making, implementation of strategies, and risk management. In addition, qualified and skilled employees in the underwriting process ensure a quality loan book with lower default rates and lower risks of fraudulent behavior.
Other Factors
The development of efficient property registration systems and digital technology has simplified transaction processes, enhanced transparency, and reduced the time taken for loan approvals. These developments have been instrumental in the growth of HFCs in India.
Looking Ahead
HFCs can further enhance their success rate by employing state-of-the-art technology, increasing digital outreach, improving their customer service, and further strengthening their risk management practices. This approach will put HFCs in a better position to achieve their objectives and cement their status as a vital part of the Indian economy.
In conclusion, regulatory measures, government initiatives, and a strong team of professionals have contributed to the success of Housing Finance Companies in India. The sector has shown remarkable resilience, and its contribution to inclusive economic growth cannot be overstated.
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