The Mumbai-based company typically provides low-income finance to consumers such as kirana shop owners, saloon shop workers, vegetable vendors, army jawans, police constables, and cab drivers are its. Aadhar’s AUM in the first quarter stood at around Rs 31,400 crore. The average ticket size for the company has been around Rs 10 lakh.
“India’s mortgage-to-GDP ratio remains on lower side. Over the past three decades, it has grown from 4% to about 11.3%, even emerging economies are around 30%. So, the scope is large. Urbanisation is also happening rapidly. Nuclear families living in small homes are also creating demand for more homes,” pointed Anand.
At Aadhar Housing, 80% of the customers still are from economically weaker section (EWS) and lower income group (LIG). The Pradhan Mantri Aawas Yojana (PMAY), which provides home loan interest subsidy for eligible households, has also been among a key growth driver in this segment. Anand pointed that the company already has 23,000 customers in the interest subsidy scheme (evolved from the earlier credit linked subsidy scheme).
Since companies like Aadhar serve underserved customers, many of whom may not have any formal income or proper documentation, they command higher spreads (the extra percentage that may be added in addition to the benchmark rate of interest), compared with prime lenders, that has also begun to attract lenders in this space.
“Premium housing finance companies will work on spread of 1.5-2.0%. We work on 5.5-6.0% spread,” noted Anand.
Given that determining the income of a non-salaried person in this segment may not be easy, Aadhar then tracks at other parameters like UPI payments data and its employees also carry out actual cashflow assessment before approving a loan disbursement. Home loan interest rates that Aadhar Housing charges range between 9.99% to 18%.
The Reserve Bank of India recently raised interest rates by 25 bps and according to Anand, the interest rate cycle is only looking up. At Aadhar Housing, 75% of its portfolio carries floating interest rates, so at some point borrowers will see their rates going up.
Despite the broader uncertainties, non-performing assets of the lender have remained in check. In the previous financial year, Aadhar’s net NPAs were around 1.1% and the company hopes to maintain it around it, said Anand.
Aadhar Housing has more than 647 branches across over 22 states. Out of those branches 160 are in the top 7-8 metros, while the rest in smaller towns, going all way to the small taluka place. The company typically opens around 40 branches each year, and has plans to add another 20 in the remainder of the current financial year, according to Anand.
Apart from opening more branches, the company also has to do lot of unground activities including combing of areas to search for potential customers, especially in the smaller markets.
“Our consumer is not one who will apply for a loan via mobile phone or website. Whatever digital penetration we talk about, there are still consumers who don't have smartphones. The consumer in small towns and villages is also not informed. That is why our reach is key,” Anand said.
In addition to its own branch expansion, the company has also rolled out what it calls “Aadhar Mitra” to tap more customers in the smaller markets. These are people like vegetable vendors or may have a grocery store or a hardware shop or a milk centre, where the company places its marketing material. These people get a commission for every lead provided by them that materialises into a loan.