"Basic Home Loan" is the first step towards your dream home.

After the launch of the Pradhan Mantri Awas Yojana (PMAY) in June 2015, the concept of affordable housing took off across India. The concept, which was once sluggish, now aims to help middle-income earners in metros and non-metros through such schemes.

But despite government initiatives, people often need assistance in getting maximum benefits in terms of suitable schemes, eligibility criteria, competitive interest rates and suitable loan-to-value ratio.

According to Atul Monga, founder and CEO of Basic Home Loans, there are several reasons why people don't get the best deal when it comes to aggregating a loan for affordable housing, especially those in Tier II and III cities.

People may have limited options depending on location and loan amount as banks use a fixed-cost and branch-led model, and lending may not be feasible if customer acquisition costs are too high. Also, a property must have sufficient market value in case the lender has to recover the deposit in the event of non-payment.

To ease home loan barriers in underserved areas, the fintech platform matches borrowers with lenders through a digital marketplace, enables a paperless loan application process online, and ensures hassle-free loan approval.

The tech-first mortgage distributor designed a figital model to combine digital efficiencies with personal assistance from a network of trained direct-selling agents. Consumers can collect home loan requests on BASIC's website, through builder partners or through the DSA network. The hybrid model helps to cater to the diverse needs of a wide target audience who are not comfortable using online transactions.

This fintech startup has partnered with 90 banks and LAPs (FIs that offer loans against property). It claims to have served 2.25 lakh customers and disbursed home loans worth Rs 10,000 crore. It currently operates in three metros (Delhi, Mumbai and Bengaluru) and several Tier II and III locations such as Thane, Mohali and Ayodhya, serving customers across 650+ districts.

The startup's key lending partners include industry players such as State Bank of India, ICICI, HDFC, Axis Bank, PNB Housing Finance, Piramal Finance, Tata Capital, Bajaj Finserv, IIFL and more.

It earns commissions from transactions made by partner banks, NBFCs and other FIs through the platform. It can go up to 2.25% of the deal value depending on the lender, type of loan product and other factors. This helps the startup maintain a healthy CM1 of 35% (contribution margin refers to gross profit per 1 unit or minus cost of goods sold). However, its services are free for retail users who collect home loans through the platform.

The back story

Monga and Kalyan Josyula launched Basic Home Loan in July 2020, during the COVID-19 pandemic, when most startups have scaled back or shut down their businesses. By then, Monga, a mechanical engineer from IIT-Delhi, had worked at top firms like PolicyBazaar and Credit Suisse and worked as an investment banker. It didn't take long for him to realize that, in addition to the general lack of credit in the affordable housing sector, the sector was beyond the top tier due to a lack of equitable credit distribution.

Terms and conditions are often so complex that they need to be spelled out, leading to inconvenience and trust issues. Things got worse during the pandemic, when FIs almost stopped working during months-long lockdowns. New-age fintechs were nimble enough, but focused on small personal loans with short repayment terms.

Recognizing the opportunity, Monga and Josyula conducted extensive market research and interacted with potential home buyers through surveys and interviews. This hands-on approach, along with their unique skills, attracted Picus Capital to invest $500K in their venture.

Basic's Playbook for Building Affordable Home Loans

BASIC aims to democratize home loans in the affordable housing sector and such schemes are rapidly gaining traction in Tier II cities and beyond. It has automated the entire application process and backed it up with suitable human interactions to ensure that the customers' access to home loans remains as hassle-free as possible.

However, the demand for home loans continues to rise in a country like India, where owning a home remains the cornerstone of economic growth and personal achievement.

Is affordable housing still a distant dream in India?

According to the 2011 census, the number of homeless people in India is 1.7 million. Calculating current figures is difficult in the absence of data. This number is likely to rise as it is currently the most populous country in the world.

Aware of the basic realities, Monga emphasizes the need to make home loans more accessible and affordable if the concept of housing for all is to become a reality in India soon. "We plan to partner with more lenders to improve technology-based product development and risk sharing, thereby catering to a larger customer base," he added.

Monga says Venture Catalysts++ (India's first multi-stage VC) was a critical component of the support while Pickus Capital provided seed funding to start Basic Home Loans. The VC firm has already invested $3.5 Mn to grow its business.

“Since initial funding, have participated in all our funding rounds. But more than providing capital, its extensive network and industry connections accelerated our growth. The Angels and Family Offices we connected with through VCats++ have provided us with funds and offered valuable assistance to overcome challenges in our journey. "Many of these investors are seasoned entrepreneurs who have offered guidance and insights whenever we hit roadblocks during our expansion," added the CEO.

However, they face the challenge of navigating complex and evolving regulatory landscapes, which can be particularly daunting and expensive for fintech brands, especially startups with limited resources.

However, the demand for home loans continues to rise in a country like India, where owning a home remains the cornerstone of economic growth and personal achievement.