Our small-ticket loan customers have grown by 5-times: Atul Monga, BASIC Home Loan

India has a shortage of nearly 19 million houses. Almost 78 million Indians live in slums, which is about 17% of the world's homeless population. A young fintech start-up, BASIC Home Loan, has been working to solve the problem of access to home finance for this segment of the population.

The company achieved an annualised loan disbursement rate of Rs 10,000 crore in March 2023. In an interview with Atul Monga, CEO & Founder of BASIC Home Loan, we spoke to him about how the small-ticket home loans market is evolving, the demographic and consumer trends, his observations of affordable housing finance space in India, why this segment is important for social impact and what role he envisions BASIC will play in order to guide the ecosystem. Excerpts here:

1. How has the small-ticket home loans market (less than Rs 20 lahks) grown for BASIC over the last year or so?

Being a company born during the pandemic in July 2020, we have always focused on tier-2 & 3 locations. Unlike traditional housing finance companies, our business model is based on a variable cost model, and our expansion is through a hub and spoke model. This helps the company stay lean and reach underserved corners of the country.

While instant disbursement in the personal loan space is what most fintech startups are focusing on, we choose to work on a lending segment that can make India truly achieve its goal of ‘Housing For All’ and, in the process, become a developed economy.

We started with tier-2 locations, and in the first phase of growth, we established strong hubs in these locations. Through these tier-2 locations, we are adding points of contact in tier-3 locations as well; and as we do so, we are getting more small-ticket customers.

In terms of actual numbers, our sub-20 lakh category has grown by about five times in terms of the number of applications processed.

2. What percentage of market share do these small-ticket home loans command in your overall portfolio?

In terms of the number of cases sanctioned, this would be about 35 per cent of the market share.

3. Can you share some other demographic and consumer trends in this space?

We are present across about 30 cities, spread over 650 districts. Our sales team comprises roughly 125 members, and we have over 6,000 agents.

As much as 41 per cent of the company’s customers are aged between 35 and 45 years. People aged between 25 and 35 make up 33 percent of BASIC’s customer base; 19 per cent are those aged between 45 and 55 years. The median age range is about 35 years.

As many as 70 per cent of BASIC’s customers are salaried professionals, and the remaining are self-employed, primarily running small businesses such as kirana stores or auto repair shops. Most of the self-employed customers have cash salaries.

4. What's unique about the consumer in this space? What's usually their financial profile? What are the kinds of houses they prefer to buy? What's the loan tenure they opt for?

Most of BASIC Home Loan’s customers fall in the low-income group, followed by the middle-income group and then the economically weaker sections. Their monthly income falls in the Rs 20,000-50,000 range. And in the case of the households that we cater to, both the husband and wife are working professionals in most cases.

A majority of them are also first-time home buyers.

So, when you look at the kind of houses they prefer, in metros, it’s usually an under-construction project or ready-to-move-in property from an affordable housing developer. A significant portion is also single- or two-storey houses in regularised colonies or outside the vicinity of the main city — like in the case of Mumbai, it would be in places like Virar and Kalyan.

Most customers also want to keep their EMIs low, and thus they opt for longer-duration of loans (over 15 years).

5. How does BASIC tap these consumers? Are such consumers tech-driven?

Some of the key offerings of the company include ‘at home’ home loans, where the customers need not visit any branch to apply for loans. The firm follows a digital customer onboarding approach and assures 100 per cent data safety — no agent can see customer contacts.

Through an advisor-led ‘phygital’ model, BASIC Home Loan empowers market influencers such as CAs, financial advisors, and real estate brokers to match customers to the right lenders. These influencers work with BASIC on a variable cost model and help them penetrate and create awareness in tier-2 and -3 cities.

Leads are made through tech, but if the consumer is not tech-friendly, our agents help them through that. Additionally, we also have exclusive tie-ups with builders for housing societies in this segment.

6. How do you see the affordable housing finance market grow in India? What role do you see BASIC play in this space?

Affordable housing finance is an ever-growing market and has been growing in double digits for the past 10 years. The company has helped, in a small yet tangible way, for India to step ahead in its goal of ‘housing for all’ by disbursing home loans worth Rs 3,500 crores. It has helped 80,000 families in 500+ districts to have a house of their own and, in the process, helped with the indirect employment of 12,000 people in tier-2 and -3 cities. Home is the basic need for the public, and so it is always in demand.

7. What has worked for BASIC in this space?

Moving the market focus more deeply from tier-1 to -2 and -3 cities has worked well for us, as we now cater to the homeless population that comes from the urban poor to rural segments of society — the weakest household section in India. This has also helped BASIC Home Loan cater to a big underserved market where both financial institutions (FIs) and fintech have struggled to distribute and bring this segment into a formal financial and socially-secured environment.

(Above mentioned article is consumer connect initiative. This article is a paid publication and does not have journalistic/editorial involvement of IDPL, and IDPL claims no responsibility whatsoever)