Affordable Housing Attracts Big Financiers: Growing Demand for Affordable Housing Drives Home Financiers to Expand Portfolio

Affordable Housing Attracts Big Financiers

The demand for affordable housing is on the rise, prompting several large-ticket housing financiers to focus on expanding their affordable-housing portfolio. These financiers recognize the immense opportunity in the affordable housing sector and are setting up specialized branches to cater to this segment.

Government initiatives aimed at achieving ‘housing for all’ have contributed to the strong demand in the affordable housing market. In this blog, we will explore the reasons behind this growing trend and how it presents an attractive investment opportunity for both borrowers and financiers.

Government Initiatives Boost Affordable Housing:
Government policies like the Pradhan Mantri Awas Yojana have provided a significant boost to the affordable housing segment. Although the program is no longer active, it has paved the way for large housing financiers to explore this sector. As a result, approximately 60-65% of fresh home loans are now dedicated to affordable housing. These initiatives have created a conducive environment for both borrowers and financiers to benefit from the affordable housing market.

Distinguishing Factors of Affordable Housing:
The primary differentiator between affordable and prime housing segments lies in the borrower’s profile. Affordable housing borrowers are typically first-time borrowers with limited credit history. As a result, they may face challenges when seeking loans from traditional banks, particularly in a rising interest rate environment. This situation presents an opportunity for housing finance companies to step in and provide loans to these individuals. Although the risk for housing finance companies is slightly higher due to the lack of robust documentation supporting borrowers’ cash flow, the higher interest rates charged in this segment make it an attractive prospect for big-ticket financiers.

Advantages for Financiers:
Large housing financiers that primarily focus on prime housing loans often face intense competition from banks, which have a cost-of-funds advantage. As a result, they may be more vulnerable to rate cycles. In contrast, affordable housing financiers operate in a niche customer segment that is difficult to assess. They enjoy significantly higher margins, allowing them to navigate rate cycles more effectively and protect their profitability. This advantage has drawn the attention of major housing financiers to the affordable housing market.

Expanding Opportunities in Tier-II and Tier-III Cities:
While the top-four states have traditionally dominated the housing market, analysts believe that the growth potential for housing financiers is now higher in regions outside these states. Tier-II and tier-III cities, in particular, are witnessing strong demand for affordable housing. Housing financiers are actively targeting these regions and expect to generate 15-20% of their business from the affordable housing segment this year.

Investment Opportunity: Secure and Customizable Plots of Land
In addition to the booming affordable housing market, investing in a plot of land offers a secure and customizable option for investors. Shanders projects, a trusted name in real estate, provides plots of land with all the necessary government and statutory approvals. These projects have received positive evaluations from leading banks, ensuring a seamless and speedy home loan process for buyers. Whether you prefer to reside in Bengaluru’s inner ring, second ring, or outermost ring, Shanders offers a wide range of plots at competitive prices.

Shanders also offers a unique opportunity to purchase a plot and villa at the price of a 3BHK apartment. With complete ownership of your freehold property, you can customize the design of your dream home, ranging from 800 sq ft to 3,600 sq ft built-up area. Shanders understands the housing needs of the migrant urban middle class and strives to fulfill their aspirations.

The growing demand for affordable housing, coupled with government initiatives, has attracted the attention of major housing financiers. These financiers are expanding their affordable-housing portfolios and setting up specialized branches to cater to this

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