JM Financial planning to start affordable housing finance unit
Financial services company JM Financial Ltd will start an affordable mortgage lender and a property brokerage, extending its real estate lending business, managing director Vishal Kampani said.
The company has sought a licence for JM Financial Home Loans Ltd from the National Housing Bank (NHB) and expects the same in around six months, Kampani said in an interview.
“The HFC (housing finance company) business will focus on providing finance for housing of low and mid-income range customers. The average ticket size could be Rs10-15 lakh. We already have real estate lending business for other categories. Affordable housing finance is a space that has a huge potential. So, the HFC will specialize in retail affordable housing finance,” Kampani said.
Mumbai-based JM Financial is engaged in investment banking, institutional equity sales, trading, broking, wealth management and private equity, among others.
The new retail housing business will be a unit of JM Financial Ltd, which will focus purely on affordable housing sector. JM Financial has two NBFCs. JM Financial’s existing real estate-focused non-banking financial company (NBFC)—JM Financial Credit Solutions—has outstanding wholesale property loans of Rs8,000 crore, while the group’s total loan book size (through the two NBFCs) stands at around Rs11,500 crore, Kampani said.
“Once we get the licence from NHB, we will start lending business in the affordable housing space. We will start ramping up the business from June and July next year and in three years, we expect to grow the business to around Rs2,500-3,000 crore,” Kampani said.
JM Financial will offer loans to buyers in around 6-7 affordable home projects it has identified. Focus areas will be extended Mumbai suburbs such as Thane, Kalyan, Mira-Bhayander and Vasai, besides Pune and Ahmedabad.
JM Financial Property Fund raised around Rs400 crore in 2007-08 to invest in residential, hospitality and mixed-use projects. In 2014, Vikram Pandit, a former chief executive of Citigroup Inc., bought a 50% stake in JM Financial’s real estate-focused NBFC for about Rs540 crore.
In an interview, Kampani said the core lending business of JM Financial is well capitalized and the size of the NBFC is expected to grow to around Rs15,000 crore, with the real estate lending book alone growing to about Rs11,000 crore in the next 2-3 years.
Separately, the firm also plans to launch its own residential broking business in the next 2-3 months with an initial investment of around Rs15 crore, which is substantial as per the current market standards.
It will target customers in Mumbai first, before looking at other cities such as Pune, the National Capital Region (NCR), Bengaluru and Chennai. There will be at least 100 large brokers for Mumbai and Pune alone.
“We will focus primarily on large inventory primary sales. Home realty broking business is currently highly fragmented in India at the moment. We feel that with the right kind of technology and professionalism among brokers, this business has a lot of scope to grow,” said Kampani.
Brokers will be recruited to manage ground-level operations professionally and transparently, including procuring quality photos, locational details, views, age of the property, comparisons between localities, facilities around and many other aspects of each and every home displayed on its website.
“Especially now, with RERA (Real Estate Regulatory Authority) coming in place, it becomes easier to deal with real estate sales and purchases in the residential space according to certain standards. This means a huge potential for us since we already have an expertise in the real estate space by virtue of our financing business,” Kampani said.
“Housing finance is a natural progression for large NBFCs because it’s a scalable business and gives them a lot of scope to grow. Housing finance in the affordable category will likely benefit from an early mover perspective and considering the demand in this segment,” said Shobhit Agarwal, managing director, capital markets, and international director at property consultant JLL India.
Piramal Finance Pvt. Ltd, an NBFC of Piramal Enterprises Ltd, too has applied for a licence this year to float a housing finance company as a subsidiary. The mortgage lending arm will also engage with smaller developers to offer loans below Rs50 crore, a segment that it has not tapped before this besides regular lending in Tier I cities, Mint reported on 10 January.
For JM Financial, housing finance and residential broking will complement each other in more ways than one, said Agarwal.
“While the housing finance business can be steadily built up, residential broking can remain niche and yet offer valuable insight into what home buyers want and market trends,” he said.