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Q&A: Will deliver distinctive home buying experience to customers, says Godrej Housing Finance


Godrej Housing Finance CEO Manish Shah speaks to CNBC-TV18's Ajay Vaishnav on the Godrej Group's foray into the housing finance sector, strategy and business outlook

Q&A: Will deliver distinctive home buying experience to customers, says Godrej Housing Finance
Godrej Housing Finance, the newest kid in the housing finance space, is confident that it will create a profitable and strong franchise in the sector while delivering a superior home buying experience to its customers. Launched in a year of pandemic and amid persisting NBFC woes, the Godrej Group Company’s CEO Manish Shah remains confident in carving out a niche for GHF. He spoke to’s Ajay Vaishnav on various aspects of GHF's launch, brand strategy, business outlook and more.
Here are the edited excerpts:
Q: Why venture into the housing finance sector? An already crowded space and amid pandemic and persisting NBFC woes.
Manish Shah: We believe that the Housing Finance market is underpenetrated and underserved. There is a legitimate space in the financial services industry for an authentic, transparent lender that is backed by the strong, core values of one of India’s largest homegrown conglomerates. Though we are a month old as far as our formal launch is concerned, but from our perspective how old we are is a bit subjective because the Group itself has a 123 year-long legacy. We started work on Godrej Housing Finance over a year ago, with getting our teams, systems, regulatory clearances in place, and just then COVID hit us. So while we have been preparing for over a year, it’s only been a month since we went live. Over the next five to seven years, we aim to build a profitable housing finance company delivering a distinctive home buying experience for our customers.
Q. What was the thinking behind the launch timing?
Shah: Three things have made us believe that this is a good time to get in, and start building what we hope will be a strong franchise over the years. Firstly, the financial strength of the Group and the Godrej brand. Looking at it from the group’s perspective, whether it was demonetisation, GST or RERA – as real estate got more formalised, for example, trusted and reputed developers like Godrej Properties have benefitted. Likewise, we expect to benefit from the polarisation in the housing finance market, especially in raising low-cost liabilities which is essential to succeed in this business.
Second is our access to ecosystems and third, our product proposition, digital delivery and the opportunity for ongoing product innovation in the home buying space.
Q. How have you fared since the launch in terms of the competition?
Shah: We feel quite confident in our ability to carve out a reasonable niche for ourselves. Given the size of the market, the headroom for growth, our ambition and having a favourable starting point, we feel pretty confident. Just as early evidence, we are 30 days old in this business and have had a chance to work with over 500 customers. This is only within the limited ecosystem with Godrej Properties where we are competing with some of the largest players in the housing finance space.
Q: With a below 7 percent interest rate, is Godrej Housing Finance pursuing a disruptive approach?
Shah: The rate of interest offered starts at 6.74 percent actually, which is lower than the current rates being offered by most banks. We have entered this space with aggressive intent. We also have the benefit of not having a legacy portfolio, and therefore we can only look forward. Our approach is to build this business by having a far more nuanced pricing grid than simply doing it by loan size or credit score. We have a fairly rigorous customer clustering process. For the customer, the consideration to choose a financier is a combination of the interest rate, fees, payment plans being offered and the flexibility in how they can repay the loan. In relative terms, customers have different priorities among these points according to what’s important to them, and getting that right from the onset is going to be quite critical for us.
Q. How different will you be from others?
Shah: For us, our whole USP is going to be crafted around three pillars. At the core is the Group’s reputation for trust, and we can see this in a lot of our early customer interactions despite us being this new. The other two are affordability and flexibility. Basically, what this means is looking at an asset like home and making it possible and easier for the consumer to own it. We are in the process of launching a product that allows customers the convenience to design their own payment plans administered almost entirely digitally. We want to give customers a home loan that is customised to what’s important to them, basis their housing needs, financial capability and convenience.
Q: What are the business targets you are looking at?
Shah: The Group aims to build a long term, sustainable retail financial services business in India. Our immediate and first goal actually is to serve 1,000 customers by March regardless of what the value is. Our goal is to deliver real value and delight 1,000 customers in our first 4 months. We hope to do this with a laser-sharp focus on fair, fast, and flexible home loans.
Q: That looks easy now you already have got 500 customers.
Shah: I believe so. These 500 customers are actually logins which are essentially customer interest. They will convert to sanctions and disbursals in due course. Three years after that, we are targeting to be at a Rs 10,000 crore balance sheet and in the next 6-7 years our target is to reach Rs 30,000 crore.
Q. Isn’t it too steep a target?
Shah: Now if you look at the mortgage market it is over Rs 20 lakh crore. So forget what it will grow at, Rs 30,000 crore on a base of Rs 20 lakh crore, is not a steep target. In the context of how large the market is, I think in the next seven years we will be barely scratching the surface, but over a 15-year period, we would be a strong player to reckon with. We feel quite confident that we will get there.
Q: In terms of geographies, where are you specifically focusing?
Shah: We have four geographies that we start with—Mumbai, NCR, Pune and Bangalore. For the next 15 months, these will be our cities of operation. Once we have established there, we will take a call and look at what are the next set of geographies to consider.
Q: Are you also looking at financing affordable housing under various government schemes?
Shah: There are two parts to affordable housing as a business—at the higher end are homes starting at Rs 30 lakh. This is the place that we are currently focusing on and it will continue to be a part of our core focus. The other segment we would like to look at a bit more closely consists of self-constructed homes in tier 2 or 3 cities with a ticket size of Rs 10 lakh. This segment involves a very different kind of expertise, which at present we don’t know enough about. Hence, we would like to watch this segment and learn more about this space.
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