How the innovative Collateral Security as Primary Security Helped the Housing Finance Company to tap more finance basis existing available security.

Company background: Housing Finance Ltd. was a housing finance company (HFC) based in India that specialized in providing home loans to middle and low-income households. It was founded in 2010 by Mr. X, a seasoned banker, with the aim of addressing the huge housing shortage in the country. The company had a network of over 50 branches across various states and had disbursed more than Rs. 1,000 crores in loans over the years. However, the company was facing a funding crunch due to the liquidity squeeze in the market and the regulatory changes in the sector.

Challenges and opportunities: Housing Finance Ltd. faced several challenges in its efforts to raise funds for its business, such as:

• Limited access to bank credit lines and debt capital markets
• Higher cost of borrowing due to the perceived risk of the housing finance sector
• Limited collateral options apart from the properties, which were subject to price fluctuations and regulatory restrictions
• Competition from other HFCs and banks that had stronger balance sheets and relationships with lenders

However, the company also had some unique advantages and opportunities, such as:

• Growing demand for affordable housing due to urbanization and demographic trends
• Ability to offer flexible loan products and personalized service to customers
• Experienced management team with a track record of profitability and risk management
• Potential for innovation in collateral security that could attract new investors and lenders

Innovative Collateral Security: To address its funding challenges and leverage its opportunities, Housing Finance Ltd. adopted an innovative approach to collateral security. It partnered with a leading property valuation firm to design a unique collateral security instrument that would appeal to a diverse set of investors and lenders. The key features of the instrument were:

• Multiple security layers: The collateral security instrument had multiple layers of security that provided different levels of protection to the investors and lenders.
• Automated valuation model: The collateral security instrument used an automated valuation model (AVM) to assess the value of the collateral.
• Dynamic collateral coverage: The collateral security instrument had a dynamic collateral coverage that adjusted to the changing market conditions and borrower profile.
• Transparent reporting: The collateral security instrument had a transparent reporting mechanism that provided regular updates on the collateral status to the investors and lenders.

Results and Impact: Thanks to these innovative measures, Housing Finance Ltd. was able to raise Rs. 200 crores in debt capital from a mix of institutional investors, family offices, and high net worth individuals. The collateral security instrument received a high credit rating from a leading credit rating agency, which further enhanced its appeal to the