Decoding Shorts - 6
Home is one of the three necessities for humans. Yet, it is only a dream for many. As per a research study, India had an estimated shortage of 50 million units in 2018. The primary reason for this problem is not the availability of credit but rather the distribution of credit. While the Banks and large HFCs focus on large ticket size loans, medium and smaller HFCs charge exorbitant pricing, making mortgage loans unviable for the mid to low income group. We want to introduce a startup bridging this gap – “BASIC Home Loan” founded by Atul Monga. They are building India’s first neo-HFC.
BASIC focuses on tier 2, 3 & 4 cities where the lenders do not have any branches. BASIC sources its customers through the B2B2C model. Loans being a derived demand, influential persons (agents) like CAs, property dealers, estate brokers, etc., have a say in decision making. The agent model ensures that BASIC is not burning cash, and the fee-sharing is on deal conversions. Recently, they have also started direct online sourcing and tie-ups with real estate developers.
Overall, BASIC follows a phygital approach, whereby BASIC digitises the entire loan cycle from sourcing loan applications to disbursement for its customers. At the same time, its agents liaise with the lenders through their physical presence with credit managers of lenders. Their proprietary tech stack takes care of omnichannel CRM, matching product eligibility matrix of customers with credit policies of lenders, paperless application & e-KYC and faster & hassle-free application.
For all the services it provides, BASIC does not charge anything to its customers. So, the biggest question is, how does BASIC make money? Well, it ideally sources loans for lenders. It collects a fee of 1-2% on the loan amount from the lenders. And lenders are happy to share this fee since they save around 5-6% on the customer acquisition cost and fixed cost on physical presence. BASIC shares a significant portion of the fee earned with its agents, giving them an additional avenue for income and better commission.
In 9 months of operation, BASIC has tied up with almost 20 lenders and enabled loan disbursements of around Rs. 250 Cr. The Company is also looking to start an FLDG arrangement with the lenders to earn higher margins on disbursements. With a massive demand for mortgage loans in India, BASIC can achieve exponential growth through economies of scale.
Backed by Picus Capital, BASIC has a long-term vision to be a neo-HFC and build its own Loan Book. Is it well poised to be a revelation in the Fintech space for housing loans? Well, time will tell! Author - Rahil Shah