Case Study

Tech-enabled home loans for India’s emerging consumers: Shubham

Access to quality housing is a critical step in improving quality of life and facilitating the creation of family wealth for low-income consumers in India. Shubham is a specialist affordable mortgage lender that operates in 9 states and has 100 branches across India. The company offers products with a strong market fit which is profitable and scalable.

Together, LeapFrog and Shubham are working together to enhance Shubham’s footprint, data science capabilities and customer experience to grow the company’s customer base by more than 500,000 people over the term of investment.

The Problem

Housing is a critical issue for the 160 million Indians who the United Nations estimates live in slums1.

One key to solving this problem is access to affordable home loans. Access to affordable housing finance from a formal financial institution has been shown to catalyse a 10x increase in home ownership, double the rates of access to toilets and clean water, and deliver a 91% improvement in overall quality of life for low-income Indian families2.

Despite this, lenders have traditionally faced a dilemma when attempting to issue home loans to low-income groups in India and elsewhere. These workers are often paid in cash as part of the informal economy, or are self-employed, and cannot provide the payslips or tax returns to verify their incomes and secure finance from formal finance institutions.

Source: The socio-economic effects of the working poor moving to permanent dwellings, RAND, 2014

Shubham’s Solution

Shubham Housing Development Finance Company (Shubham) is a specialist mortgage lender committed to making it easier for India’s emerging consumers to buy their first homes.

The company operates in nine states across India, leveraging technology and its vast network of trained sales agents to provide access to finance for previously underserved consumers. Shubham has tackled this issue with a range of technologies, processes, and efficiencies, in particular drawing on data collection, predictive analytics, and machine learning to help make sense of applicants who may have no formal documentation to prove their income.

This strategy of digitally enabled underwriting involves building rich data lakes from the profiles of thousands of low-income customers, and from this data constructing statistical models that determine reliable benchmarks to assess their income.

Characteristics of Shubham’s target <~US$30k loan segment

Source: Shubham, 2022. *LTV: Average Loan to Value (of property).

LeapFrog’s Impact

Shubham has taken on a major challenge in delivering housing finance to low-income consumers, and LeapFrog is committed to accelerate its growth.

LeapFrog will help to scale Shubham’s platform, in particular building out data science capabilities to make best use of the over 120 data points collected from each Shubham loan applicant. Through continual learning, analysis and modelling, this data can deliver more accurate and efficient credit checks on workers with low documentation and improve overall accessibility and affordability.

A greater focus on data will also assist Shubham to build a better picture of their impact, with tracking to be implemented to show how new housing improves access to sanitation, clean water, reliable electricity and greater living area per occupant.

LeapFrog’s customer experience (CX) team will work with Shubham to improve customer journeys, with a focus on attracting low-income customers and solving their specific challenges. In previous portfolio companies these CX efforts have included creating products for semi-literate and digitally excluded groups and expanding branches and sales teams in
low-income areas.

India’s Housing Shortfall by 2022


Read our full Impact Note here:

Shubham Housing Development Finance

1 UN, Urban population Living in Slums by Country, 2021 2 The Socioeconomic Effects of the Working Poor Moving to Permanent Dwellings, RAND, 2014. Cover image: Brian Glanz, CC BY 2.0

Disclaimer: This material is not intended to constitute investment advice or an offer to sell, or the solicitation of an offer to purchase, interests in any fund, portfolio company of any fund or other product sponsored or managed by LeapFrog Investments or any of its affiliates. This material and/or its contents are current at the time of writing (or such other dates as may be indicated herein). Any view expressed herein is based on the view of the author(s) and available information, and is subject to change without notice. Past performance is no guarantee of future results.