Chennai: The financing arm of truck maker Ashok Leyland will set up a housing finance company focused on affordable housing for people in the unorganised sector with no salary proof.

Last month, Hinduja Leyland Finance (HLF) had filed an application for a wholly owned housing finance company with the National Housing Board, the apex financial institution for housing that comes under the Reserve Bank of India.

Called the Hinduja Leyland Housing Finance Ltd, it will have an initial capital of 95 crore, which will be funded by bank loans and internal accruals.

“We have gained an expertise in financing trucks owners who don’t have documents of their earnings which will help in the housing sector," said S. Nagarajan, managing director, HLF. From a risk perspective, housing loans have the least bad loans and the market is large, he added.

For clients, the non-banking financial company (NBFC) will tap into its 500,000 customers spread across 1,500 locations in India.

NBFCs and housing finance companies together account for half of property loans disbursed in India, which is currently 2.25 trillion, says a report released by Crisil Ratings in July.

Loan against property has been growing at 36% annually over the last three years and non-banks have been at the forefront of the surge, riding on innovation, ability to offer products based on customized cash flow assessment and faster turnaround times, said Pawan Agrawal, chief analytical officer, CRISIL Ratings.

There is a sizeable population of self-employed in the unorganized sector whose loan needs are not addressed as they are perceived to carry higher risk, said an analyst tracking housing finance companies who did not want to disclose his name.

The housing market is big and bad loans are relatively less compared to other retail loans therefore there many companies jumping in the bandwagon and setting up housing finance companies over the last three year, said the analyst.

There are 64 housing finance companies in the country and a large of number of them were set up in the last five years.

Both Muthoot Finance Ltd and Manappuram Finance Ltd set up housing finance subsidiaries last year.

Despite banks having a lower cost of funds, it is housing finance companies and NBFCs that have better ability to assess risk and price retail loans, and operate in the market catering to different set of population, said Vaibhav Agrawal, vice president research—banking at Angel Broking.

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