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Time of India
2 days ago
- Business
- Time of India
ETtech Explainer: Why are fintechs and their investors going after secured loans?
Live Events More and more fintech lending startups focusing on secured credit products such as loans against property (LAP), and loans against securities like mutual funds, are attracting venture capital (VC) home financing players like Vridhi Home Finance, Basic Home Loans, Easy Home Finance and others have been attracting venture investors, with their promise to bring about technology disruption in the sector. ETtech explains:Secured lending business is a financial service that provides loans to borrowers against collateral such as a vehicle or property. While banks and traditional non-banking financial companies (NBFCs) have been offering secured credit like home loans and auto loans for years, fintechs stayed away from these products, given the need for physical operations to evaluate the properties and assets. But now, startups are investing in branches and are building on-street teams to manage these shift comes as unsecured lending platforms witness a slowdown in the market, prompting startups to move towards secured credit products. Fintech platforms, including Paytm and Mobikwik, faced revenue pressure as banks and NBFCs scaled back on unsecured lending over the last few quarters. Even new-age NBFCs like Fibe, Kissht and others have seen stress on their books as new loan sanctioning slowed down. These trends have led to fintechs scouting for opportunities in secured Home Finance, Basic Home Loan, and Vridhi Home Finance together received nearly $150 million in equity capital from venture funds like Elevation Capital, Bertelsmann India Investments, Norwest Venture Partners, and Ranjan Pai's Claypond Capital. Mahaveer Finance, an NBFC based in Chennai, has raised $23 million from Elevation Capital and others with the aim of adding LAP and other similar NBFC Techfino has recently raised around $7.5 million from Stellaris Venture Partners and Saison Capital. Founded in 2019, the fintech company operates secured and unsecured lending models. The company focusses on secured more businesses move towards secured products, the unsecured lending startups are jumping onto the bandwagon. Fintech players Cred, BharatPe, and Paytm have announced a similar entry into secured products over the past year. Unsecured lending players like Kissht, Loantap, Fibe, and Kreditbee ventured into secured lending products such as are reducing their operational costs by making branches more efficient and leveraging technology to save costs and compete with big businesses. 'Traditionally, 70% to 80% of a housing finance company's costs go into running physical branches. We're bringing that down to 40% to 50% by leveraging technology, which enables lower customer acquisition costs and better interest rates,' said Atul Monga, CEO, Basic Home banks and larger NBFCs, branch expansions, while keeping costs in control, will remain a challenge for these while being attractive, tends to show up high non-performing assets (NPAs), which means fintechs will need to invest in strong collection teams. TransUnion Cibil's data released in January showed that LAP books showed among the highest NPA trends. As of September 2024, 1.7% of the LAPs were due for 90 days or more, said the report.'Investments in physical assets and branches would eat into the delta that fintechs can make between the cost of borrowing and rates they can offer their customers,' said Rohit Chokhani, founder, Easy Home Finance. 'This business will be sustainable only when there is a major scale.'
Mint
30-04-2025
- Business
- Mint
Investing in gold or real estate in India in 2025? Compare tax benefits, liquidity and returns to decide
Investors in India are exploring smart strategies to build wealth. Two prominent options are investing in gold or taking a home loan to invest in real estate. Both approaches offer their own set of advantages and disadvantages. According to Atul Monga, CEO and Co-founder of BASIC Home Loan, 'The decision to invest in gold or purchase a home should be based on one's financial goals, liquidity needs, and investment horizon.' 'Gold has surged to record highs, driven by global economic uncertainties and rising demand for safer investment options. For many Indians, gold is a crucial asset that acts as a reliable hedge against inflation. Moreover, the accessibility of digital gold & gold ETFs has further democratised this asset class. 'Real estate, on the other hand, offers long-term capital appreciation and rental income benefits. While the initial investment in real estate can be substantially higher than investing in gold, it is a tangible asset that can be used as a financial investment and a practical utility. Ultimately, the best investment strategy is the one that aligns with an individual's overall financial goals and risk tolerance,' he added. Let us hence discuss five key factors to help you in deciding wisely: Gold is generally ideal for your short term goals. It acts as a hedge against inflation and is more liquid than real estate in nature. Options such as Sovereign Gold Bonds (SGBs) can provide capital appreciation with the added benefit of annual interest. Home loans on the other hand provide for support in the long run. Real estate can provide rental income and appreciation in the long term. According to RBI guidelines home loans are available on favourable terms through various financial institutions. These loans are provided in the range of ₹ 10 lakhs to 25 lakhs or even higher by leading financial institutions, banks and NBFCS, depending on the creditworthiness, credit score, repayment capacity and past history of the borrower and his potential to convince the lender of the same. For complete clarity on this, consider reaching out to your respective lender. Gold is easy to buy, trade, or sell, so it is a clear winner in this department when compared with real estate, especially with digital gold and SGBs listed on stock exchanges. Property, though lucrative, lacks easy selling ability and liquidity. Selling of property units generally takes time, and it comes with higher transaction costs and associated complications. RBI also follows a strict Loan to value ratio (LTV) to ensure borrower equity. Gold is an investment idea that is both scalable and affordable. You can begin with just a gram in SGBs, thus making it fairly suitable for small and medium-level investors. Home loans on the other hand need a larger upfront investment, sincere commitment, down payment, registration, EMIs etc., and are considered best for those with long term financial stability. Home loans provide for significant tax deductions under Section 80c on principal and Section 24(b) on interest. Gold, while reasonably profitable, lacks such deductions. Still, capital gains on SGBs are tax-exempt on redemption for individual investors. Therefore, on a balanced level, gold has delivered solid returns and still remains a reliable protection, i.e., a hedge against inflation. SGBs offer extra interest income, boosting the total yield. Real estate on its part can provide for rental income, capital growth in the long run and now a broader access through REITs, thanks to SEBI's investor friendly changes and reforms. Gold is a strong contender for short-term liquidity and inflation protection. Home loan-backed real estate is better for long-term wealth and income. A diversified investment strategy combining both can offer stability and growth. Hence, to conclude, gold can be a better choice for short-term liquidity and inflation protection. For long-term wealth, income generation, and rental yield, home loan-backed real estate can be a viable option. A strategically diversified investment strategy that combines both can offer stability and growth simultaneously. For complete clarity on the same, it will be prudent for you to consult a certified financial advisor and take any investment decision only after considering factors such as proper research, individual financial capacity, credit worthiness, credit scores, EMI repayment potential, current financial health, pros and cons of both investment ideas among other associated issues. Disclaimer: This article is for informational purposes only and should not be construed as financial advice. Readers are advised to consult a certified financial advisor before making any investment decisions. First Published: 30 Apr 2025, 05:57 PM IST
