Many housing finance companies are in competition to extend loans for the affordable housing segment, which has grabbed lot of attention since the economic downturn. Dewan Housing Finance, Kerala’s Muthoot Pappachan and Manappuram Group are planning to set up housing finance companies catering to the affordable housing segment.

If mortgage penetration were to increase to 10 per cent in five years, the mortgage market could grow at an annual rate of more than 20 per cent over this period, provided there is rationalisation of property prices, supply of affordable homes and coverage of smaller markets, an Icra report said.

Muthoot Pappachan Group, whose main business is gold loans, would be applying for a licence with National Housing Bank (NHB) for starting a housing finance company — Muthoot Housing Finance, which would cater to low-income groups.

“The idea is to tap the low-income segment that is not serviced by the banks and large housing finance companies. We are looking at customers, who have a monthly income in the range of Rs 6,000-

Rs 12,000, with an average ticket-size of Rs 2.5 lakh-

Rs 6 lakh,” John Muthoot, chairman and managing director of the group, said.

Dewan Housing Finance (DHFL), the country’s fourth largest mortgage lender, is at present in the process of setting up an affordable housing arm with a capital of Rs 93 crore.

The new company will look at low and low-middle income households in Bihar, Uttar Pradesh, Madhya Pradesh, Chattisgarh, Jharkand and Orissa in a phased manner over the next few years.

V P Nandakumar chairman of Manappuram Group, which is primarily into gold lending, would also be rolling out a housing finance company in his personal capacity in partnership with M Anandan, former managing director of Cholamandalam DBS Finance. The company would be based in Chennai with an initial capital ofRs 25 crore.

At present, interest rates range from 12 per cent to 14 per cent per annum. It targets 1,500 loan sanctions.