WFH trend brought good business for us: Atul-BASIC Home Loan

As Co-founder and CEO of BASIC Home Loan, Atul Monga is trying to change the way affordable homes are financed in India. He wants to help India's low- and middle-income people buy a home in the most convenient, fast and stress-free way.

In this exclusive Q&A interview with RealtynInfra.com, Atul discusses the impact of pandemic on India's housing sector, why a dignified home is a basic necessity, the challenges of convincing the market that a phygital approach is what the lending sector requires for sustainable scale up in tier-2 and tier-3 cities, and why he is building a profit-focused venture from Day 1.

Q. How has the past year been for BASIC Home Loan?

We have had a fantastic start to our venture. The business has been great for us. We started just after the first wave of pandemic. There were a lot of uncertainties being discussed and deliberated on how the consumer would respond to their housing needs. 

For us, the focus was on affordable housing loans. The trend of work from home/anywhere brought good business for us in the tier-2 and tier-3 cities. Lot of young millennials bought houses among these.  

Overall, in our first 9 months of operations, we have logged in Rs 400 cr of loans and received sanctions for Rs 375 cr. We generated direct and indirect employment for around 1500 people. We have now tie-ups with 20 of India’s largest and specialist home finance institutions. The best part has been, we are operationally profitable, for a year that has been tough for many companies to survive and sustain. 

For us, the aim is now to stay profit-focused and hit a revenue of Rs 15-20 cr in FY22.

Q. Why did you quit PolicyBazaar, and start a business right in the middle of a pandemic?

I have worked in the fintech industry where I have set up and led businesses for various digital lenders in the past 6 years. While working in the fintech space I found that the affordable housing market has huge potential, which is yet to be tapped by several players in the ecosystem. 

Banks are focussed on big ticket loans as their fixed cost model doesn’t justify smaller ticket sizes, even though affordable housing is a priority sector lending category, as mandated by RBI.

Plus, the current tech development in home loans is through web aggregators who only generate leads for the banks without any fulfilment support. Their reach is also limited to tier 1 cities

I also realised that Indian mortgage market is still primarily offline given regulatory and operational constraints and major disruption can be done using technology. 

The Indian lending landscape has also undergone its fair share of transformation in the past few years. The aftermath of COVID still looms large with price correction in real estate, hesitant home buyers, and cautious lenders. 

However, for us, the scenario yielded positive results. One of the primary reasons for the same has been our sharp focus on the affordable housing segment, highly ignored otherwise by lenders.

The pandemic also accelerated digital transformation in the Indian home lending space which worked in our favour, as our vision and the greater intent is to digitise the home loans process and increase affordable loans penetration for mid-and low-income households in India. 

At the same time, we believe technology is an enabler. We believe in the 'Phygital' approach, and are investing to create a strong network of agents who utilize our BASIC technology in handholding consumers, from 'research' to 'final disbursement' of home loans.

Q. What challenges do you face in achieving your existing goals in the current financial market ecosystem?

One of the main challenges has been to convince banks and HFCs to utilise technology, which is the biggest pain point as they have been using legacy processes and systems and it is hard to break into them. The overall mortgage industry remains an offline industry primarily due to the fact that India doesn’t have a centralised database of property ownerships and other details.

Banks are slow in technology adoption and even though they acknowledge the value of our tech offerings, it takes a lot of time and effort, to convince their chain of commands, to integrate our products with them.

Also, the decisioning part, where a property is to be analysed, is difficult to get digitised, and there are various regulatory reasons because of which banks and HFCs have to make disbursements offline through paper documentation.

Q. In your experience, what has been the biggest impact of the pandemic on India's housing sector and its consumer?

Pandemic has altered several narratives. Work-from-home culture has become a way of life, people are increasingly focusing on savings and asset formation. Pre-pandemic, people were commuting for work across the city at their convenience. However, the situation has changed now and mobility is expected to be lesser than usual. 

People have realised the significance of having a home. This has also been backed by the need for ample space to continue with daily routines while maintaining social distance. This is the time when individuals can consider stepping up to their homeownership plan.

Q. What's your vision for the housing and lending ecosystem in India?

We want to work towards solving the problem of housing in India and we believe one way to solve this is by providing easy financing access to the low and middle income households.

To achieve this vision, we want to become the preferred platform for Indians for their affordable home loan needs, preferred broker to the banks, preferred partner to our agents and preferred employer for our employees. 

I believe that the entire housing and lending ecosystem needs to be well developed and all the stakeholders need to share a unified vision. With a shared vision and clarity of purpose, all the participants in the ecosystem need to work collaboratively. 

The need of the hour in this new paradigm is for the financing ecosystem participants to develop new products in order to accelerate the housing opportunity that will drive large and long-lasting economic benefits for the country.

Q. Why a phygital approach, when the whole market has been focused on technology focused solutions? 

We believe that technology can never replace a human connection. The play of technology is to get rid of mundane tasks, and automate ease in process. The human connection would stay relevant, they will play intelligent/smarter roles, or where technology cannot reach.

Our focus has been on the ‘Phygital’ approach, as digital-only processes are not profitable at least right now. There will be a steady shift to digital acceleration, and one needs to assess efficiency and efficacy from an investment perspective to go all out on digital. 

Also, the regulator currently wants a few steps to be processed offline only. Otherwise, we have the requisite technologies to do those steps too online. As and when industry adapts to these technologies, we also intend to move to an online approach.

For India, and for tier-2 and tier-3 cities right now, we believe the phygital approach is the best foot forward for the category we are trying to disrupt, the regions we are tapping, and the people we are trying to cater to, in helping them achieve their dream of a house of their own.

The current home loan process requires customer hand holding, that an advisor can help them with end-to-end fulfilment at no additional cost. We need to look at customer convenience, after all. They are the reason we exist. We can’t thrust technology into them, without building their confidence. 

Q. Do you face a challenge explaining why you choose a phygital approach to the investor and business partner ecosystem?

Indian Fintech (lending) industry has been primarily driven by growth on the unsecured side of lending, i.e. personal loans, business loans and credit cards. So many investors in India are yet not exposed to the workings of an asset backed loan. 

Globally, the scenario is quite different, as mortgage lending players are a very successful bunch, in both Americas and Europe, and valued highly for the business they bring to the industry.

There has been a frenzy around how technology-led approach is the most efficient and quickest way to scale a start-up. At times, investors box themselves when they look at assessing a start-up’s business model, approach, and its ability to deliver returns at a large scale.

For us, why we chose Phygital Approach has been a realistic assessment of the market conditions. We have the ability to build technology, but then it has to be in a time-structured way that you are not ahead of the curve. We want to ensure that every penny spent by our investors is towards building a profitable business, and expanding the industry.

Currently, we are focusing on the Phygital approach because that’s the best way to be capital efficient and revenue focused, as there are regulatory restrictions on many technology aspects that can speed processing of loans, as well there is a lack of central database for evaluation of properties. 

So, while at times, it does become difficult to explain Indian investors regarding our strategic choice of going the Phygital way. However, the more people we are meeting in the investor ecosystem, the more appreciative they are becoming of the business traction that we have built through this approach and are now spending more time understanding these processes.

Q. Profit or Scale? What's your priority for BASIC Home Loan?

I believe Profit and scale goes hand in hand for any startup. All entrepreneurs need adequate financing to scale up their businesses, and at BASIC, we believe revenue is the best funding source for any company. 

So from ‘Day One’, we have been prudent in our operations. We are ensuring every penny counts when it is spent. We don’t want to burn money just for the sake of scale, and would rather have a balanced approach. 

If you would look at our current business traction, we have done cumulative disbursements of Rs 250 crore in just 7-8 months of our existence. We are now doing business in close to 133 districts, 24 states in India. We broke even in March on a sales operations basis.

We are constantly building technologies and products to improve access to home loans in India and are focused on increasing penetration of mortgages in tier 2, 3 cities. So to validate our business thesis, we have to grow in scale but at the same time our technology helps us to reduce operational costs to help improve our profit margins.

My priority with BASIC is that we are consistent in our daily goals to achieve operational efficiency and larger business outcomes. We want to plough back profits into the business to grow it.

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