2008-09 Entrepreneur Manoj Viswanathan was responsible for selling apartments in Bengaluru. Work with Value Budget Housing Corporation (VBHC) with his partners Jaitirth “Jerry” Rao and PS Jayakumarit was not easy for Manoj to find suitable mortgage lending providers for potential customers.
Home First team members
The engineering graduate and MBA graduate spoke to several real estate finance companies, but felt none of them were able to provide credit to VBHC’s informal, low-income customer base.
“They have been reluctant to finance loans for affordable housing for low-income people. As the three of us came from finance backgrounds, we decided to solve this problem by starting an affordable housing company to help the segment of customers that is not served by traditional credit services. This is how the idea for Finance was born,” says Manoj.
In 2010, the trio established a headquarters in Mumbai First home and began making home loans more accessible to low- and middle-income individuals. In ten years, Manoj and his partners have grown Home First into a leading home finance company.
In fiscal 2020, the company claims to have posted an AUM of Rs 3,618 crore With 50,000 customers and 800 Employees. At the beginning of 2021, Home First was listed at the BSE and NSE in an IPO that has been subscribed 26.66 times.
In an exclusive interview with SMBStory, Manoj Viswanathan, MD and CEO, Home Firsttraces the journey of Home First and how it serves the underserved affordable home loan segment.
Edited excerpts from the interview:
SMBStory [SMBS]: How did you three come together to start Home First?
Manoj Viswanathan [MV]: Jerry, Jayakumar and I have been with since our time citibank. When I decided to quit and start my own business, I teamed up with them to start VBHC as a budget housing company building affordable homes.
We learned early on that traditional banks are reluctant to lend to low- and middle-income customers. Over a few coffees, we discussed how a Pani Puri seller, a Kirana owner, or anyone with a cash salary could get a home loan.
Home First MD and CEO Manoj Viswanathan
We realized that we should use our financial expertise to get into the supply side of home loans and make them more accessible. So in 2010 we founded Home First.
SMBS: What were the initial challenges you faced? How were they resolved?
MV: While we intended to serve the unorganized sector, there was no system for assessing such a customer’s creditworthiness. The formal channels simply did not consider them creditworthy and their assessment required building a new assessment methodology.
Just as every challenge breeds a movement, this problem led to one of our earliest and most successful campaigns, which we called We See You, Not Your Documents.
We have introduced a “touch and feel” credit system with no set template. We have personally met with each family to understand and assess them in detail and tried to find a tailor-made solution for them.
SMBS: How does this touch and feel system work?
MV: Our customers usually come from families who earn in between Rs 20,000 and Rs 50,000 a month. Several members of a family can earn small incomes here. Only one or two may have formal income in the form of a salary, while others may earn a small cash salary.
The main task is to find out their total income. We spend time with families to understand their total income, which helps us complete a home loan.
SMBS: The touch-and-feel system sounds time-consuming. Tell us how you scaled it.
MV: Traditionally, such a process would involve asking customers to provide physical documents and photocopies, picking up the documents, sending them in for processing, and then reviewing them.
Home First used technology to speed up the entire process. Initially, we used handheld scanners to scan documents. Then we used smartphones to record conversations with customers and capture their working environment. Everything would be fed into our system.
Now when our team member goes to a family, he/she just scans all the documents on a smartphone and it is uploaded straight to our system.
We also validate their information such as GST returns or vehicle registration through online integrations. We are now able to quickly determine a customer’s authenticity.
The Home First Team
SMBS: How did you diversify into different home loan categories?
MV: Initially started with just home loans, our products have evolved around the needs of our customers and have grown with them. The additions of products like Home loan, real estate loan, home loan and renovation loan and shop loan have helped us become a unique destination for all home loan and store loan needs.
We are also able to offer these services to customers through innovations like document scanners and now data analysis and cloud technology. We believe that our investments in technology and a deep trust in digital processes and payment mechanisms set us apart.
SMBS: Who are your competitors? Aside from your use of technology, how do you stay ahead of the game?
MV: The rest of the world has caught up with the affordable housing trend enough to become a buzzword in the lending industry today. Several lenders like Tata CapitalShriram body, can finetc., operate in similar segments.Aadhar Housing, Gruh Finance Limited,
What helps us stay on top are small things that make a big difference. Our customer focus is centered on the point that we ensure pickup at the customer’s doorstep. The client only has to meet and speak to one official – an account manager, so there are no problems in the process.
SMBS: How do you reach your target customers?
MV: Although our average customers are in the low- and middle-income segment, they all use smartphones. we use youtube, Googleand Facebook Ads to reach them and show them how we can help them build their dream home.
We also regularly provide home design tips, run small competitions for clients and host webinars on social media to explain home loan developments and clarify any doubts you may have.
We are also well connected in the construction industry. Builders, contractors and brokers know us and refer us to customers. For example, if a builder is in contact with someone who wants to build a house, they will be referred to us.
SMBS: What were the key milestones on the business trip?
MV: Our first office was actually in there Bengaluru. A year after our launch, we received Series A funding from Bessemer Venture Partners. By 2013 we had approved 1,000 loans and in 2014 we became profitable.
As word spread about us, the next big milestone came in 2015 when we onboarded 5,000 customers. The next year we doubled our customer base and in 2017 both ICRA and true north shown confidence in us with an A+ rating or Series C financing.
Since then we haven’t looked back. Recent achievements include a Rs 700 crore investment off Warburg Pinus last year and will be listed on the NSE and BSE this year.
SMBS: What were the most difficult moments the company experienced?
MV: Because we focus on a specific type of customer, events that affect the customer affect us in some way.
Demonetization in late 2016 adversely affected middle and lower-middle income groups. This affected the liquidity of the entire market and the current revenues of our customer segment.
However, our personal connection with customers, as well as our investments in technology and digital payment mechanisms have helped us weather the dark times. Recently, the COVID-19 pandemic has also disrupted many industries, but our portfolio and customer base showed resilience and made a comeback.
After our customers regained their jobs, business started to pick up. By December 2020, our metrics were back to pre-COVID levels.
SMBS: What were your thoughts behind the listing? Why now?
MV: Last year we wanted to be listed. We submitted our DRHP in November 2019 and almost got listed in March 2020. But then the pandemic hit the world and we went into lockdown. The discussion with Warburg started around the same time because We felt we needed a large, global investor to ensure sufficient capital in case the pandemic spreads.
Then the market showed positive sentiment in the last few months and our card was active until March 2021. We were doing well and our payouts and collections improved month-on-month. Therefore, this seemed like a good time to go public with an IPO to expand our capital base to meet future capital requirements.
The total IPO size was Rs 1,153 crore. Rs 265 crore was the main share that went to the company. The remainder was the secondary part that existing shareholders sold.
SMBS: What are the future plans for the company?
MV: As more and more people migrate to cities due to urbanization and nuclearization, the affordable housing segment will remain strong. We plan to further penetrate the market as we believe these families are overwhelmingly home owners rather than renters. There is a segment that prefers to rent, but ownership is a stronger phenomenon that will last at least 20-30 years.