Leveraging Partnerships in the Housing Sector: The Case of a Successful Collaboration Fostered by IHF between HomeHub and IndoStar Home Finance
November 28, 2021
- By Simran Pal Kaur, Research Associate, IHF
(This blog is based on inputs from interviews with co-founders of HomeHub and IndoStar Home Finance)
Collaborations allow different organisations in the housing sector to work together to solve a specific problem or diverse and complex issue by contributing towards a transformative change that impacts low-income housing. Indian Housing Federation (IHF) acknowledges that collaborating instead of competing can enable additional resources, fresh ideas and unique viewpoints to promote strategic and creative responses. Embarking on its cultural sutra of promoting collaborations, IHF recently forged a successful collaboration between HomeHub and IndoStar Home Finance working in the domain of affordable housing finance. A pilot anchored through this collaboration has been conducted and currently both the organisations are exploring further ways to ensure long-term continuity in their collaboration.
Introduction to the organisations
HomeHub
HomeHub is a start-up established in January 2021 with the aim to be an ecosystem enabler that shall empower people to build homes. HomeHub offers mobile application based solution that provides technical support, financial assistance and construction knowledge. HomeHub was conceptualised to create an enabling environment for the key stakeholders engaged in self-construction of the house. The organisation was founded by four professionals who hold over a decade-long experience each in the housing sector and are highly motivated to support relevant interventions.
The core-team members of HomeHub were aware of the needs of the stakeholders in the sector and the functioning of the affordable housing finance institutions (AHFIs). The team members had previously worked with the housing finance sector and had gained substantial experience with the households during the process of extending credit to them across cities.
Given their familiarity with the functioning of the AHFIs and the bottlenecks in its operations, they created a mobile app solution that would:
Efficiently enable AHFIs to remotely monitor the construction of self-built houses
Support households in submitting construction updates, make disbursement requests, track disbursements and record the expenses towards construction.
Enable AHFIs to remotely disburse tranches of loan to the respective households while reducing operating costs.
Currently, HomeHub has expanded its functions in Tamil Nadu and Maharashtra but it plans to operate across India. In Odisha, it is collaborating with Svatantra Micro Housing Finance Corporation and Habitat for Humanity, India for beneficiary-led construction (BLC) projects under Pradhan Mantri Awas Yojana – Urban (PMAY-U).
Photo Courtesy: HomeHub
IndoStar Home Finance
IndoStar Home Finance is a four-year-old entity primarily set up to drive affordable housing finance. Over the past years it has been able to make a difference to approximately 11,000 low-income households across the country building their first homes. Approximately, 40 percent of their home loans are sanctioned for self-construction of new homes and about 60 percent are sanctioned to households purchasing a unit from a builder or making a secondary sale transaction. Almost half of their loans cater to self-employed individuals working in informal economy while the other half caters to salaried individuals. Average ticket size of a loan is about Rs 10 lakhs and the average property values is approximately Rs 15 lakhs.
IndoStar believes that there is considerable scope in improving housing value chain in south India. Tamil Nadu has been the major state where they have a significant presence, followed by Andhra Pradesh and Telangana with a reasonable presence, followed by Maharashtra and Gujarat. These five states primarily dominate IndoStar’s operations.
Given the experience of the management they were cognizant of the generic challenges that startups face. However, in the past three years there were certain unprecedented challenges of:
Infrastructure Leasing and Financial Services (IL&FS) crisis which fell short of cash and defaulted on its obligations to other financial institutions.
It was followed by a crisis with Dewan Housing Finance Ltd (DHFL) which incurred subsequent defaults.
The covid-19 pandemic brought a new set of challenges from March 2020 onwards.
These three major disruptions constrained the momentum in business and impacted the liability side of the business. However, support from IndoStar’s promoters and the investments in IndoStar Capital, helped them to manage through these difficult times.
During covid-19, there were challenges on account of undertaking technical inspections because the technical agencies and people were cautious of physical meetings and interactions. This meant that IndoStar had to make some alterations in their business models.
Photo Courtesy: IndoStar
IHF’s Role in Fostering Collaboration
IHF has accumulated over six years of grassroots experience and understanding of the complex and diverse space of low-income housing in India. The team at IHF has formed umpteen connections in the past years and has facilitated several collaborations in the sector.
Mr. Rajesh Kumar Tak (Co-founder, HomeHub) and Mr. Ganesh Shankar (Co-founder, HomeHub) had long known Mr. Manikandan (Institution Builder, IHF) and in one of the meetings in January 2021, both the organisations interacted and discussed the current situation of the low-income housing sector. During the interview with Mr. Ganesh, he shared that in this meeting IHF came across as a “storehouse of knowledge and knew a lot about this space [housing sector].” It was acknowledged that IHF had “done a lot of work in this space that requires one to be on ground to understand the real challenges”. During these meetings, IHF shared its thoughts on the idea of a mobile app proposed by HomeHub. From there onwards HomeHub and IHF connected monthly to discuss HomeHub’s operational strategies and gain direction for the same.
Mr. Shreejit Menon (CEO, IndoStar Home Finance) had also been in touch with IHF since long and in the course of various forums they had often connected. IndoStar comprises forward looking management professionals who are interested in technological solutions to improve efficiency across the value chain in the housing finance sector. IHF understood the aims of both the organisations and what they needed. While HomeHub had designed a solution, IndoStar was facing a challenge, thus the right introduction helped both organisations to explore a promising opportunity and compliment one another’s operations. IHF actively introduced HomeHub and IndoStar ensuring that the interaction was fruitful and they do not operate in silos any further.
Successful Pilot Supported by the Collaboration
After facilitating the interaction between HomeHub and IndoStar Home Finance , their partnership was formalised and it was decided that a pilot shall be conducted to test the situation on ground. On one hand, HomeHub could offer a solution that makes the process of physical inspection of houses under construction more efficient to monitor and plan for loan disbursement. It also helps to improve productivity because the time saved through technological intervention can be invested for other purposes. While getting the first customer is always a challenge for startups, this collaboration removed that anticipated hurdle and created opportunities for HomeHub. On the other hand, IndoStar appreciated this solution, supported its adoption and shared suggestions from a user/ customer’s standpoint. IndoStar’s dependency on the external technical agency was reduced because of the technological features in the HomeHub app.
For the pilot, IndoStar chose two locations of its branch – Trichy in Tamil Nadu and Aurangabad in Maharashtra - where a large part of affordable housing finance was sanctioned for self-construction. The teams actively engaged on ground to lead this initiative and got the required technical training done for the team and customers to use this app. The pilot also aimed at procuring feedback from the branch and the customers about the challenges that they face currently and how this solution resolved them. Approximately 150 houses were covered in this pilot across the two branches. This pilot was carried out for three months and was crucial because once the solution is acceptable it validates its potential and indicates the scope of improvements and/ or customisations.
The collaboration has been fairly successful and the organisations have been able to test the solution in a few more markets. Customers are indeed using this app for uploading their evaluation and latest stage of construction. IndoStar is seeing the potential to reach out to customers directly and have them feed the relevant information into the app without the involvement of any intermediary. IndoStar has started with the core feature of the app and will look at other features as the collaboration matures further. Simultaneously, HomeHub has been able to test the scope of its solution for AHFIs. It is a win-win situation where the households can plan construction efficiently, the entities are able to create business opportunities and IHF is able to strengthen a part of the large housing ecosystem and ensure that its stakeholder engagements and interactions lead on to new ideas and deeper learning about the sector.
HomeHub, IndoStar and IHF have a passion for affordable low-income housing and have used their core competencies for the sector.
Collaborations in the Housing Sector
Collaborations are important for the housing sector to develop strategies and interventions extending beyond metropolitan cities towards peri-urban areas and small towns which hold immense potential and market for private and development sector’s participation. Collaborations acknowledge that no one organisation has the answer to all problems but many organisations are solving some problem in the value chain. It allows the convenience to hold on to one’s core competency and leverage another collaborator’s competency. Collective and collaborative initiatives such as the one fostered by IHF, facilitate the uptake of sustainable and resilient housing. A collaborative approach is critical and central to all levels of engagements in the sector.