Godrej enters housing finance; targets Rs 10,000 crore balance sheet in 3 years

The diversified Godrej Group is foraying into the financial services space. As a first step, the company on Tuesday launched Godrej Housing Finance and plans to invest Rs 1,000-1,500 crore in it in the first three years.

Godrej Group has a presence across locks, consumer durables, fast moving consumer goods, security solutions and aerospace among other businesses. Launching a housing finance company will complement its real estate business Godrej Properties and will give Godrej Housing Finance an advantage over many other mortgage lenders given its understanding of the realty market, top company officials told reporters.

Godrej Housing Finance intends to focus on the mortgage business starting with home loans, followed shortly by Loans Against Property. In the near future, the company will expand its product portfolio to offer Business and Personal loans, leveraging the group’s consumer and agri business ecosystems to build these verticals.

“As a group, our philosophy is to think quite carefully before entering new spaces. Financial services checked all the boxes of what we thought was an industry that offered us the opportunity to create a scaled institution and also allowed us to leverage some of the advantages we have in terms of the huge customer base of Indians across the country in various segments, a strong brand, a very effective access to low cost capital and allowed us to bring that as an advantage to our future customers in this business,” says Pirojsha Godrej, chairman of Godrej Housing Finance.

Godrej Housing Finance aims to focus on retail mortgages and has targeted a balance sheet of Rs 10,000 crore and a customer base of 40,000 borrowers in the next three years. It will be investing Rs 1,000-1,500 crore initially through its own balance sheet.

The company will initially start offering home loans in Mumbai, National Capital Region, Pune and Bengaluru. For loans up to Rs 1 crore, it will charge an interest of 6.69 per cent, which will be lowest in the industry. For loans above Rs 1 crore, the interest rate spread will not be too high, said officials.

“Being extremely competitive helps. Our USP starts there. Our second USP is building flexible products that innovate at a project level. For instance, our flexibility on how we design customised repayment plans and the third is customising products at customer segment level, thereby delivering most value,” said Manish Shah, MD and CEO of Godrej Housing Finance.

The retail housing market is pegged at around Rs 21 lakh crore. Housing Development Finance Corp (HDFC) is the largest mortgage lender in the country; several other private and public banks like State Bank of India and ICICI are also very strong in this business.

In the last couple of years, the non-banking financial services sector has been hit hard. Last year, Dewan Housing Finance Ltd (DHFL), once the second largest mortgage lender, was admitted to the bankruptcy court. The COVID-19 pandemic too has had an impact on the wider economy and the financial services sector. But, Godrej sees growth and market share gain opportunities in this backdrop.

“The brand and the expertise that the group has, offers us a right to win what looks quite attractive. We have a high degree of confidence that now is the right time. Part of the reason for that is even some of the large players in the space were NBFCs and lot of those companies are now facing challenges. Some of the companies no longer exist. So, actually a large segment of the market has disappeared from a supply perspective, over the last couple of years. That creates an opportunity,” said Pirojsha.