Edelweiss forays into Bangalore to finance housing

Leading financial services group company Edelweiss Housing Finance Ltd (EHFL) has entered the lucrative Bangalore market to provide home loans as the tech hub accounts for about 70 percent of the housing finance in Karnataka.
“Bangalore is amongst the top residential markets in the country after Mumbai and Delhi. In view of the potential growth of the resilient IT industry and increasing migration, demand for housing in this tech hub will remain robust,” EHFL chief executive Anil Kothuri told reporters here Monday.
After securing license in September 2010, the housing finance arm has disbursed Rs.200 crore as home loans at fixed and variable rates during the six months of its operations in last fiscal (2010-11) and has set a target of disbursing about Rs.1,000 crore this fiscal (2011-12) in the three cities and six more cities where it plans to commence operations during the year.
“Our approach is based on offering differentiate products and an internet based sales process for applicants. We offer home loans repayable over 25 years in the long-term and against property up to 80 percent of the value,” Kothuri said.
With operating margins under pressure in housing finance, the company’s interest rates are on par with the industry in a narrow band starting with 10.5 percent per annum.
As demand for housing will remain strong in cities across the country due to rising incomes, demographic dividend and increasing urbanisation, the retail housing finance market size is projected to double over the next five years to Rs.3 trillion from Rs.1.5 trillion currently.
“We expect to capture around two percent of the Bangalore market over the next five years, which will give us a loan book of about Rs.1,000 crore by 2015,” Kothuri said.
Of the Rs.150,000 crore (Rs.1.5 trillion) disbursed as home loans across the country last fiscal, about Rs.10,000 crore were disbursed across Karnataka, with Bangalore accounting for 70 percent of it and Mysore about 50 percent of the remaining 30 percent loan amount.
“Mortgage market is still at nascent stage in India for various factors due to lack of regulation in the housing sector. As against 70 percent in the US, 15 percent in Singapore, penetration of mortgage loans is a mere 5 percent in India,” Kothuri noted.