Vastu Houses, a prominent player in the affordable housing finance sector, has been paving the way for strategic growth. CEO Menon emphasizes that going public is a phase in their long-term plan, indicating a commitment to building an institution over the years rather than rushing the initial public offering (IPO).
Backed by a prestigious group of institutional investors, Vastu’s股东 list includes Multiples PE, led by Renuka Ramnath, alongside Pramod Bhasin, Vikram Gandhi, and Samir Bhatia. Major financial players such as IFC, Prosus, Norwest Venture Partners, TA Associates, Faering Capital, 360 One Asset Management, and Creation Investments add to its robust investor base. Menon’s prior experience includes roles at Barclays, Standard Chartered Bank, and GE Capital, underscoring the company’s leadership with a wealth of financial expertise.
Beyond Urban Centers
Commenting on the sector’s future, experts agree that the next growth wave will emerge from metropolitan outskirts and smaller cities. Menon highlights the potential in the next 40 to 200 cities, emphasizing opportunities for self-employed professionals in individual houses, self-construction, and resale activities. New government initiatives promoting digitized land records and better business ease of entry further bolster their growth prospects.
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These government thrusts provide a supportive backdrop, with Menon asserting that digital land record systems and favorable business climates are vital for execution. Government schemes like the Pradhan Mantri Awas Yojana (PMAY) and Urban Housing for All by 2022 have significantly widened their customer base, representing a market worth around ₹13 trillion ($160 billion), with HFCs and banks holding major shares.
Navigating Challenges
Despite growing aspirations among rural populations, accessing credit remains challenging. Manushree Saggar, senior vice president at ICRA, underscores the sector’s propensity for delinquencies due to the borrower base’s lower income levels and limited financial safety nets. However, she notes that with favorable demographic trends and robust government policies, the segment is poised for steady growth.
The influx of younger populations and the trend toward urbanization opens avenues for capturing a substantial segment of potential homebuyers. With tier 2 and tier 3 cities offering discounted rental rates and improved infrastructure, companies like Vastu further expand their operational footprint.
Growing Legally and Technologically
Vastu operates in over 14 Indian states, avoiding dependency on any single geographical area where no revenue segment exceeds 15%. The company reported a consolidated revenue of ₹1,254 crore in FY24, compared to ₹768 crore the previous year. Profit margins expanded from ₹285 crore to ₹360 crore, reflecting strong financial health.
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Over the last year, Vastu has shifted focus towards tier 2 and 3 areas to address housing gaps. Their product portfolio includes home loans for new constructions and renovations and mortgage loans to finance personal and business needs. These efforts are part of an expansion strategy driven by recent fundraising rounds totaling over $500 million from prominent investors including Prosus, TA Associates, IFC, and Norwest Venture Partners.
Vastu stands out for developing its proprietary technology platform, Pulse, which manages lead generation, loan origination, customer management, underwriting, HR, and accounting processes internally. This approach differs from those in similar sectors usually dominated by private equity investors.
Focusing on Micro-Loans and Affordability
Building on these innovations, Vastu aims to cater to smaller-ticket micro-housing and MSME loans, reaching a broader clientele. In this context, the company also explores government-backed public housing projects, believing that these sectors present a long-term opportunity backed by substantial government support.
Menon champions the technological prowess developed in-house, asserting that the technology is tailored to the specific needs of tier 2 and tier 3 city populations. This philosophy has made Vastu an attractive proposition for venture capital investors traditionally skeptical of traditional sectors, who now seek diversified portfolios with stable returns.
Conclusion
Vastu Houses exemplifies a strategic and technologically driven approach to affordable housing finance. Their ambitious plans for expansion in identified markets, coupled with strong investor backing and dedicated technological development, underscore their commitment to long-term success. By addressing rural aspirational segments and leveraging comprehensive systems, Vastu continues to build a formidable presence in the housing finance sector.
Stay tuned for more updates on Vastu’s journey and their future growth strategies.
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