For years, the typical affordable homebuyer was seen as a salaried household taking a relatively small loan to buy its first home. Housing finance companies are now describing a wider customer base, with borrowers taking larger loans, maintaining strong credit records and coming from different income groups. Lenders are also expanding into smaller cities and say some of their recent growth is coming from customers who are new to the market.
Bajaj Housing Finance’s affordable business has an average loan size of about Rs 18 lakh. About 65% of customers in its Sambhav Housing segment have credit bureau scores above 750, while salaried borrowers account for 68% of the business. The segment operates across 73 urban and 72 rural locations.
PNB Housing Finance is seeing another change. Management said competition for salaried borrowers had become tougher, prompting it to increase the share of self-employed customers in its Prime business. Aptus Value Housing Finance, meanwhile, is raising its average loan size and using customer selection to target borrowers it considers higher quality.
The comments from these lenders point to several different changes taking place within affordable housing finance rather than one uniform shift in the customer base.
Bigger Than Before
The size of an affordable home loan is one of the clearest changes in the lender commentary.
Atul Jain, executive director at Bajaj Housing Finance, said the company’s affordable business sits towards the upper end of the segment. “Affordable ticket size is close to 18 lakhs,” he said. The company generally lends between Rs 10-12 lakh and Rs 27-28 lakh in the segment.
The average size of its wider Sambhav Housing portfolio is expected to decline as the company expands beyond the biggest markets. Management expects greater business from Tier 2 and Tier 3 locations to bring that average down from around Rs 28 lakh to Rs 26-27 lakh.
Aptus is moving in the other direction. The company expects its average ticket size to increase by at least Rs 1 lakh from last year. Executive chairman Munuswamy Anandan said the increase would contribute to growth alongside branch expansion and other sourcing channels.
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Credit Tells More
The size of the loan is only one part of the borrower profile.
At Bajaj Housing Finance, about 65% of customers in the Sambhav segment have credit scores above 750. The business also has a 68% salaried mix, giving the lender a large base of borrowers with conventional employment income.
Aptus said it is using the increase in average ticket size alongside what managing director P Balaji called “calibrated customer selection strategies”. The approach, he said, is helping the company “onboard higher quality customers”.
The company has also adjusted lending rates on selected loan sizes as part of its customer acquisition strategy.
Salaried Isn’t All
PNB Housing Finance’s experience shows why lenders are looking beyond salaried borrowers.
Management said there was “very tough competition in salaried segment” in its Prime business. The company responded by moving towards a greater share of self-employed customers.
The lender was asked whether that change meant it was taking on more risk. Managing director and CEO Ajai Kumar Shukla said its underwriting and collections teams had experience in the segment.
“We have good seasoned expertise team in underwriting, especially in self-employed segment,” Shukla said. He added that delinquency in Prime and Emerging had improved sequentially.
The change also affected the return from the Prime portfolio. PNB Housing said the shift in customer mix provided a benefit of around 10-15 basis points to yields.
New Faces, New Places
PNB Housing’s affordable business is also showing signs that lenders are reaching customers who were not simply moving from another lender.
The company’s balance-transfer-in share in affordable housing fell to 3.4% in the June quarter from 10.5% a year earlier. Shukla said the change showed that the business was increasingly adding borrowers who were new to the company.
“It means whatever growth we have done in last quarter, the business, it is primarily new customer in the market,” he said.
The lender has also started sourcing affordable loans through selected Prime and Emerging Market branches. Those branches generated almost Rs 30 crore of affordable disbursements in June, according to the company.
Bajaj Housing Finance is expanding its Sambhav Housing business in non-metro markets, with management expecting Tier 2 and Tier 3 locations to account for a larger share of the portfolio over the year.
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