There is no serious fin-tech player for housing finance

In the last few years, fin-tech sector in India has gained a lot of traction with many new players emerging in payments, lending, insurance and personal investments segments. In particular, the online lending startups have been hogging the limelight with millions of dollars being poured into them in the form of equity or debt or a mix of both. A closer look at these tech startups reveals that most of these are focused on either personal or SME financing while no one is even attempting to disrupt the largest & most lucrative segment of housing finance & mortgages. The reasons are not so obvious. Facilitating a home loan mortgage transaction doesn’t only require getting through the maze of complex valuation decisions, excessive documentation and tight regulations but also deep expertise of the underlying real estate value chain.

No wonder only a real estate player could have cracked this space and Square Yards is doing it with its mortgage arm, Square Capital, emerging as one of the largest integrated mortgage marketplace in the country. The company facilitates INR 300 to 350 Crores (~ USD 50mn) of total loans disbursements every month with home loans & loan against property contributing to around 75% of the overall volumes.

Tanuj Shori, CEO & Founder of Square Yards says, “Housing finance dwarfs all other forms of retail lending by a big margin but there is no serious fin-tech player attempting to simplify it through technology. There is a huge opportunity for someone to reduce a typical 30 to 45 days mortgage disbursal cycle to few hours by bringing buyers, sellers, their respective agents, property valuers & title insurers, and lending institutions on a common platform. There cannot be a better time to do this when most lenders are starting to push consumer financial data aggregation into the core components of their customer experiences. And increasingly there is a greater acceptance among regulators for tech based authentication services such as e-KYC and digital signatures.
There is another large fintech/proptech opportunity in ‘Unmortgaging’ the mortgage itself. First time buyers face increasing difficulty trying to get on the housing ladder as rising house prices typically outstrip wages. Co-ownership models that work as a stepping stone between renting and owning have the potential to disrupt the traditional mortgage. In these models, the occupier puts forward some equity to own a percentage of the house and pays rent on the remainder to the capital providers who buy out the remainder. They then have the option to buy more of the house over time by adding more equity as they like. The more they own, the less rent they pay. Tech facilitates automated valuations and brings transparency of ownership. This allows people to have houses they really love and in areas they aspire to live in – those which they would be priced out of if attempting to buy in the traditional manner.

Square Capital was started a couple of years ago to capture the captive home loan business originating from Square Yards’ real estate transactions but it soon expanded itself to get external independent business and steadily grew to be the largest distributor for secured mortgage industry in India. Currently, Square Capital has tie-ups with more than 69 banking & NBFC partners and it facilitates more than 800 loan transactions for them on a monthly basis. Replicating its success in the real estate world, Square Capital follows a similar Online to Offline (O2O) approach for loans during customer acquisition and service delivery. It has unique online capabilities to provide accurate eligibility of an applicant linked to credit bureau & various banks’ product & credit policies, ability to perform e-KYC of the clients through integration with NSDL & Aadhar network and direct Integration with Banks’ loan origination systems. It has an equally strong offline sales team that provides loan advisory & end to end fulfilment support in the lending process – managing client documentation, sanctions and assisting the client till the entire lifecycle of loan disbursement.

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