India: Ummeed Housing raises $5.6m from Lok Capital, Duane Park

Ummeed Housing Finance Pvt. Ltd has raised a series B round of funding of $5.6 million from impact investor Lok Capital and Duane Park, a top company executive said.

The Delhi-based affordable housing finance company had raised $3.5 million from the same investors in October.

Ummeed will use the funds to expand to new locations in north and central India and for investments in technology.

“This year is going to be about ramp-up in volumes and hubs and moving to the second phase two of our technology implementation. Phase one was about cloud-based systems. This year, we will introduce mobility in the front end and we will start working on credit scoring models,” founder and managing director Ashutosh Sharma said.

The company focuses on affordable housing finance loans in the range of Rs3-25 lakh, said Sharma, who has spent 25 years working for Citibank, HSBC and Bank of Montreal, before founding Ummeed in January last year.

Since starting operations in September, the company has managed to achieve assets under management (AUM) of close to Rs20 crore through its three hubs in Delhi, Chandigarh and Jaipur. A hub serves a radius of 30-50km and Ummeed aims to generate an AUM of Rs25-30 crore from each hub annually.

The company is targeting AUM of Rs120 crore by the end of the current financial year, said Sharma.

According to Sharma, mobility and building a tailor made credit scoring model for affordable housing finance will be two big drivers for the business.

“Mobility helps improve your turnaround time dramatically. Traditional credit scores are not specifically made for affordable housing finance. The market is so large that if you want to achieve scale, you have to use technology from a process and underwriting perspective,” said Sharma.

Ummeed will also use the funds to add new hubs as it looks to enter new markets. The company plans to add six more hubs this fiscal.

“Our focus is on the states of Haryana, Rajasthan, Madhya Pradesh and Western Uttar Pradesh. We are looking at cities such as Agra and Gwalior and other tier II cities in these four states,” said Sharma.

Ummeed was impact investor Lok Capital’s maiden investment from its third fund, for which the investor is looking to raise a total of $100 million.

“Housing finance is one of the core areas of focus in the latest fund. We’ve had the conviction in the sector for long and we felt that multiple pieces required for the sector’s growth are falling in place. Refinance for housing finance companies is more readily available today, and the housing stock in this category is also on the rise,” said Vishal Mehta, co-founder, Lok Capital.

According to a November report by ratings company Icra Ltd, the affordable housing segment has grown at a faster pace than the overall industry growth for housing finance companies.

“As per Icra’s estimates, the total loan book of all the players in the affordable housing segment stood at Rs96,000 crore as on 31 March 2016, indicating a growth of 28% during FY2016. Opportunities for growth are high for the segment given the current low penetration levels as well as the government thrust on the affordable housing segment,” the report said.

Also Read:

India: Lok Capital, Duane Park invest $3.5m in Ummeed Housing Finance

India: Impact investor Lok Capital targets 5-6 investments in FY17

This article was first published on Livemint.com