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When 39-year-old Nitesh Dubey decided to buy a home in Gurugram, his first step towards realising this dream was finding a home loan. The timing couldn’t have been better—home financing rates are at historic lows. Everyone from public sector banks to private sector banks to housing finance companies have slashed floating home loan rates to under 7%. Just two years ago, these ranged between 8-9%.

Dubey’s first stop was the public sector banks. But he binned the idea since a home loan is a long-term engagement, and he didn’t want to be locked in with a public sector entity for the long haul. He also steered clear of housing finance companies after negative feedback from friends.

Eventually, he shortlisted two lenders. One was Kotak Mahindra Bank. He already had a car loan from the bank, so he believed the process would be smoother. Moreover, at 6.5%, Kotak offered the lowest interest rate among the banks. Dubey’s other option was an unlikely pick—three-year-old non-bank finance company (NBFC) Navi Finserv Pvt Ltd. At a sticker price of 6.4%, the Bengaluru-based NBFC offered the lowest interest rate among all lenders.

Navi is a new entry to the home loans space, launching the product as recently as January 2021 to add to its personal loan offering. A home loan relationship manager said the startup has disbursed close to 300 home loans this year in Bengaluru. Navi also has operations in six other cities, including Hyderabad and Chennai. In total, the company claims to have disbursed some 800 home loans till date.

Home coming

In September alone, borrowers sought Rs 60,259 crore ($7.9 billion) worth of home loans, 19% higher than a year ago, according to Transunion Cibil.

Navi Finserv has consolidated assets under management (AUM) worth Rs 2,000 crore ($263.8 million) till August 2021. Of that, digital personal loans account for Rs 530 crore ($70 million), while housing loans amount to just Rs 60 crore ($8 million) of its portfolio, according to a November report by ratings agency India Ratings and Research.

Admittedly, Navi’s scale is clearly insignificant thus far. But in going head to head with banks on interest rates, the message is clear—it intends to fight banks for customers. This, even as it waits for its own banking licence, which it applied for in 2020.

“The history of home loans (shows it) is conquered by a teaser rate. It helps get noticed,” says a senior banking executive. For banks, offering such low interest rates is a no-brainer. At low repo repo repo rate The rates at which banks borrow from the Reserve Bank of India. Low repo rates translate to low interest rates from banks. rates and high high Economic Times Bank deposits rise 12 per cent in FY21 on higher CASA growth: RBI data Read more CASA CASA CASA Current account, Savings account- Banks use the deposits in CASA to lend.

AUTHOR

Arundhati Ramanathan

Arundhati is interested in how people use money in the digital age and how new economies will take shape based on that interaction. She writes the newsletter Ka-Ching! every Monday. She lives in Bengaluru and has spent over 12 years reporting and writing on various subjects.

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