The Tata Group is set to re-enter the housing finance business, which it had exited over six years ago.
The Tata Group is set to re-enter the housing finance business, which it had exited over six years ago.
The new business will be part of the group’s NBFC business under Tata Capital and will be operated through a wholly owned subsidiary, Tata Capital Housing Finance.
According to Praveen P Kadle, managing director, Tata Capital, the group had exited the business earlier as Tata Finance was scaling down operations. “The group had decided to move out of unviable businesses,” he said. As a result, Tata Homefinance was sold-off to IDBI in 2003.
However, with the home finance business registering a compounded annual growth rate of around 18% over the past few years, the group decided to re-enter the segment.
Tata Capital Housing has already received a certificate of registration from the National Housing Bank (NHB) and intends to have a network of 30 branches across the country in the next 12 months.
Targeting the middle-income segment, primarily in the Tier II and III markets, the management expects to disburse housing loans of about Rs 400 crore in the first year of operations.
“The initial corpus of Rs 100 crore will be invested by Tata Capital, of which Rs 10 crore has already been invested. We are exploring various fund-raising options,” said Kadle. To capture market share in the Rs 1,25,000-crore housing finance industry in India, the Tata Capital Housing management plans to match the industry benchmark in terms of interest rates. A host of innovative strategies will also be implemented to instil confidence and transparency in the business.
The Tatas wanted to start their second innings in home finance by buying IDBI Bank’s home finance subsidiary IDBI Homefinance, which was on the block. However, it lost out to Dewan Housing Finance Ltd, the lowest bidder.
Nevertheless, the company will look at inorganic possibilities “if valuations make sense”, Kadle added.
Over the years, Tata Capital sees housing finance forming a significant part of its overall financing business. The home finance company may also look at raising fixed deposits from the public at a later date.
“If we demonstrate good performance and create good quality (loan) book, then I think in 18 months to two years, we can get approval for fixed deposits (from National Housing Bank),” Kadle said.
(With NW18 inputs)
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