A housing finance company feels that documents like salary slips are not the only way to judge the credit-worthiness of a potential borrower
If you want a loan to buy an affordable home, but do not have enough documents (like salary slips), do not worry. Micro Housing Finance Corp Ltd (MHFC) is ready to provide a loan of up to Rs6 lakh for people who do not posses these documents.
“We do not believe that documents are the only way to test the trust of a client. I do not think that a salary slip will actually determine whether he or she will be able to repay the loan or not,” said Rajnish Dhall, founder, MHFC.
“A salary slip will only show how much a person earns, but there are other ways to check the earning and repayment capacity of a borrower. You can conduct independent verification and surveys to know that. For example, if I am lending to a vegetable vendor, then I observe his business. I see him every day on the street from 9 in the morning to 8 at night. You can easily make an estimate of his earning,” added Mr Dhall.
According to the latest National Sample Survey Organisation (NSSO) report, there are over 80 million poor people living in India. The slum population is also increasing and as per the Town and Country Planning Organisation’s (TCPO) estimates in 2001, over 61.8 million people in India were living in slums.
There is a huge demand for affordable housing supported by easy finance for this segment. Many banks reject loan applications of a prospective client if his company does not have a provident fund facility as the applicant might be working in a small & medium enterprise.
Besides the urban poor, a person earning Rs 8,000-Rs15,000 per month can approach this
micro-finance company for a home loan.
MHFC is targeting people like vegetable vendors, maids, taxi-drivers, etc. In fact, its first customer is a food vendor, the second is a housemaid, and the third a beautician.
“We conduct personal interviews of the customers and carry out surveys to know about the earnings of people from a particular segment. We can easily make out what a taxi-driver or maid earns. If we are lending money to a maid, we call the employer to enquire more on her earnings. We conduct ample number of enquires before lending,” added Mr Dhall.
The company has an equity capital of Rs33 crore. It has already disbursed around Rs2.50 crore to about 100 borrowers. “We have plans to sanction loans worth Rs60 crore by next year,” claimed Mr Dhall.
“We only mortgage the house being financed. To sanction a loan, we do not require a guarantor or any other security,” said Nachiket Shelgikar, co-founder, MHFC.
MHFC charges a prime lending rate (PLR) of 12% to clients and provides a loan of about 80% of the property value. As a security, the company mortgages the property being financed. While other banks require a minimum of two or three types of assurances, this company does not. MHFC claims that it has not yet faced any problems with loan repayments.
“We take two weeks to sanction loans from the date of application. We also charge 1% processing fee before disbursal, and the client has to pay a Rs300 application fee, based on which we process the application and provide a sanction,” said Mr Dhall.
The micro-finance company does not advertise. It ties up with developers who build affordable housing projects costing between Rs3 lakh to Rs6 lakh per home in urban areas. When the builder advertises his project, he also adds that he has tied up with MHFC.
At present, the company has tied up with seven affordable projects like Shubh Griha (Boisar, Maharashtra); Global City (Virar, Maharashtra); Swarajya (Ambivali, Maharashtra) and Om Shantinagar 2 (Ahmedabad, Gujarat).
“We are planning to tie up with 20 more projects which are in the pipeline. We intend to commence operations shortly in Bengaluru, Surat and Kolkata. We are also in discussions with various State governments for housing initiatives for the economically weaker section or lower income group,” said Madhusudhan Menon, founder, MHFC.