Michael and Susan Dell Foundation, Ronnie Screwvala invest in Micro Housing Finance Corp

Micro Housing Finance Corporation (MHFC) has raised Rs 35 crore in new equity funding from existing investors including the India Financial Inclusion Fund (IFIF) and the Michael & Susan Dell Foundation. A new domestic institutional investment firm -- Unilazer Ventures Pvt Ltd -- founded by Ronnie Screwvala also participated in this round of funding.

A housing finance company, MHFC focusses on providing housing loans to financially excluded urban lower income families and had a track record of no non-performing assets (NPAs). The company has catered to close to 4,000 families, mostly from the informal sector, ranging from self employed bamboo straighteners and mechanics to salaried employees like housemaids, drivers and security guards who now own homes with financing from MHFC.

Madhusudhan Menon, chairman, MHFC, said no NPAs to date clearly demonstrates the credit worthiness of the informal sector with sufficient but undocumented incomes. “We believe that the company’s investments in technology, people and processes are paying off, and this new capital should accelerate the geographical reach and depth of our operations,” said Menon.

With this funding, MHFC's equity now stands at Rs77 cr, with debt at a similar level - from reputed financial institutions including the regulator, the National Housing Bank (NHB), HDFC Ltd and various commercial banks.

The housing finance company has a project-led approach and ties up with developers, both public and private focusing on urban affordable housing (as defined as being in a price range generally not exceeding Rs 10 lakhs). Its loan amounts are usually around Rs 5 lakhs (not exceeding 85% of the cost of the house) for a period not exceeding 15 years, with the house serving as security for the loan. It currently charges a rate of interest between 11% and 13% per annum for women owners and those defined as from the weaker section by the NHB / RBI.

According to Geeta Goel of the Michael & Susan Dell Foundation, MHFC has in the last 3 years, successfully demonstrated a viable financial model for the low income families who are typically excluded from the mortgage finance market, restricting their ability to buy homes in safe, hygienic conditions.

MHFC received its license from the NHB in February 2009 and began operations in June 2009. It has an active presence in Mumbai, Pune, Ahmedabad, Surat, Jaipur, Nagpur, Indore, Bhopal and Kolkata, and currently helps finance customers (who are financially excluded) on approx 150 low-income housing projects.

Unilazer Ventures, the new investor on board, feels the overall a business model has significant potential to scale, “and is in line with the company’s focus towards impact/ social investments,” said Unilazer’s MD Amit Banka.

The company’ housing loans outstanding on date is Rs100 crore (Rs72 crore as on March 2013) with cumulative housing loans sanctioned now at Rs165 crore (Rs130 crore as on  March 2013). For the full year ending March 2014, the company expects to touch close to Rs250 crore in cumulative loan sanctions and Rs150 crore in loan disbursals.