Mahindra Rural Housing Finance is aiming to more than double its overall advances book to Rs 20,000 crore in next three years.
“The three-year horizon for this business is to take it to a Rs 20,000 crore book and get it IPO (initial public offering) ready by stabilising the asset quality and ensuring that the cost of operations are kept under proper control,” said Ramesh Iyer, Chairman of Mahindra Housing Finance.
Unlike mainstream HFCs, Mahindra Housing Finance currently solely focuses on small rural housing and affordable housing loans.
As of March-end, Mahindra Housing Finance’s net loans stood at Rs 6,845 crore, of which 30%-35% of the book is affordable housing and the rest consist of rural housing.
The ticket size of rural housing loans is usually between Rs 150,000 rupees to Rs 300,000. These loans are extended predominantly for purposes such as home improvement, renovation, converting “kutcha” houses to “pakka” houses. The HFC is aiming to bring the ratio of affordable housing and rural housing loan ratio to 50:50 in the years to come, Iyer added.
The HFC plans come on the back of a slowdown it saw during the Covid years. Shantanu Rege, MD & CEO at Mahindra Rural Housing Finance, said the HFC was adversely impacted by Covid-19 during FY21 and FY22. Its total loans fell from Rs 7,128 crore as of March 2021 to Rs 7,029 crore as of March 2022. Total income too fell from Rs 1,455 crore as of March 2021 to Rs 1,377 crore during FY22.
“Disbursements were actually at very piecemeal levels on the rural housing side because the entire team was focused largely on collections…just getting to the customer and collecting that equated monthly instalment (EMI) was a challenge,” he said.
While focus shifted to collections, the HFC also reviewed its non-performing asset (NPA) position, improved underwriting standards and subsequently its rejection rate on rural housing loans also increased to 30%-40% of overall loan requests in the last one year. However, with improvement in collection efficiency and underwriting standards, Rege said FY24 is the first full year where the HFC will focus on growing its disbursements.
“In the past two years, ever since we introduced bureau checks, the portfolio quality is much better as compared with previous years. And that gives us the confidence that with these checks, we can really look at expanding and growing,” he said.
As of March-end, Mahindra Housing gross and net stage-3 assets stood at 10.46% and 7.80%, respectively. The HFC is aiming to lower the gross NPAs to below 5% by end of this fiscal, Rege said.