Q1. Could you start by giving us a brief overview of your professional background, particularly focusing on your expertise in the industry?

I'm a Chartered Accountant and an Associate Life Member of the Institute of Directors, with 18 years of hands-on experience in the mortgage industry. Over the years, I've worked with both public sector undertakings and private commercial banks, including SIDBI, ICICI Bank Ltd, Aditya Birla Finance Ltd, PNB Housing Finance Ltd, ICICI Housing Finance Ltd, and Aavas Financiers Ltd. My work has taken me across Karnataka and much of Maharashtra, where I've managed a wide range of mortgage products—primarily home loans (HL), loan against property (LAP), and various segments like Prime, Affordable, and Urban Local Bodies (ULB). I've also played a key role in launching new business locations for PNBHFL, ICICIHFC, and Aavas Financiers Ltd, giving me end-to-end experience in setting up branches, driving growth, and managing portfolios. Currently, I lead an investment banking firm called InvestArc Corporate Advisors LLP, where we focus on fundraising through private equity, venture capital, venture debt, M&A, and NPA resolution.

Q2. From your experience underwriting mortgage borrowers, what is one early warning signal that investors may be missing when they look at reported asset quality today?

We can observe that many players are entering into unsecured funding, and customers are receiving unsecured facilities with just one click. Borrowers are using these rapidly growing unsecured personal loans or gold loans to service their main property EMIs. This can reflect the portfolio as Standard for a short term. Investors can watch for borrowers using alternate financing options (unsecured fintech loans, Gold loans) to keep their mortgage accounts looking Green.

Also, rescheduling tenure due to ROI changes can push loans beyond 60-70 years, past borrowers' retirement age. Since borrowers keep repaying the original EMI on time, the loan stays Standard, which leads to structural repayment stress. Investors can have a close look at how many loans now mature beyond the borrower's projected retirement age.

Q3. LAP is growing faster than home loans, but lenders are tightening underwriting. From what you are seeing on the ground, where is the opportunity in LAP—and where could investors be underestimating the risk?

Yes, LAP is growing faster than HL. Lenders (Banks, NBFCs & HFCs) have regulatory norms to keep the mix of HL & LAP at 60:40 or max 65:35. Since LAP is the riskier product and the end use can't be monitored precisely, underwriting norms are tighter for the product.

MSMEs will always need funds for working capital, and most of the time they use the funds for the same purpose for which they applied. These are always considered high-quality borrowers & lenders can target well-established business clusters for sourcing. 
Micro LAP is shaping up well for the Affordable Housing Finance Industry. Here, lenders have decent portfolio quality because they understand borrower needs and how to structure the loan. Also, it comes with an additional risk premium. Tier 2 and Tier 3 market penetration is the key.

Underestimating Risk: Many lenders are using surrogate programs to structure LAP eligibility. Most of the time, it is to accommodate the borrower's requirement (higher loan amount). Investors need to slice and dice the data to understand the product-wise risk. End-use verification should be done as much as possible and not just based on "Customer Declaration". Current LTV levels are crossing 70% of the market valuation, which is very aggressive, and in many cases, valuations are inflated to accommodate the loan value.

Q4. With banks, HFCs and NBFCs increasingly competing for the same borrowers, where do you see a durable competitive advantage emerging—and which type of lender is best positioned to capture it?

Understanding the customer and his business is the key. Salaried underwriting and processing are the most common and can also be done using machine learning. However, SENP underwriting requires different abilities and skills. Sourcing points for SENP, Financial analysis, use of proper surrogates, and risk-based pricing are the factors that will lead lenders to the best business numbers, along with portfolio quality.

Q5. What is one key takeaway from your recent experience that you believe industry leaders and investors should pay closer attention to—and why could it shape the next phase of India’s housing finance market?

Recently, many lenders have entered affordable housing to earn better margins. "Affordable Loans" are generally treated as loans "Not meeting Prime loan criteria" and hence can be processed under Affordable with higher ROI. This leads to disaster, and many lenders have burnt their hands, not just their fingers, due to this. Yes, Affordable loans are remunerative, but only when the lender understands “Who is Their Customer" under the "Affordable Category". Assessed Income skills deliver the best outcome for an "Affordable Customer’s eligibility. 

In India, there is still a huge opportunity in Tier 2, 3 & 4 cities to expand the Affordable business. Builders and developers are also launching affordable projects due to increasing saturation and the non-affordability of luxury projects for the middle-class segment. The government is launching affordable projects through its Urban Local Bodies (ULBs), like RGHCL (Rajiv Gandhi Housing Corporation Ltd), and demand is strong in Metro cities. The scalability of affordable finance will definitely shape the next phase of the Indian Housing Finance market.