Arranging money to buy a house is a pivotal aspect of a homebuyer's journey. However, thanks to the development of Finance Technology (Fintech), mainly related to loan disbursal, securing a home loan has become more straightforward and hassle-free. India's real estate business landscape is undergoing a dynamic transformation, with various sectors converging to drive change. This transformation is strikingly evident in the nexus of startups, real estate, and fintech.
India’s fintech sector has gone through rapid expansion, most notably in the aftermath of the coronavirus pandemic. Fintech firms have made record strides in various financial domains, capitalising on the widespread integration of cutting-edge technologies and the bubbling digitization wave of the country.
With a valuation of ₹1.92 Lakh Crores as of 2019, India's Fintech industry, is estimated to hit a valuation of ₹6.2 Lakh Crores by 2025, corresponding to a massive Compound Annual Growth Rate (CAGR) of almost 22%. Behind this growth, there is a driving force of the escalating demand for real estate financing solutions. These cater to the needs of both property investors and homebuyers.
Historically remembered to grow at a snail’s pace after independence because of outdated laws, the Indian real estate sector has undergone a remarkable transformation over the years. Thanks to changing regulations and statutes, it has developed into one of the fastest-growing sectors of the nation. A report by the National Real Estate Development Council (NAREDCO) revealed that real estate growth between 2017 and 2028 will likely reach a 19.5% CAGR. Moreover, it contributes approximately 6% of India's Gross Domestic Product (GDP).
India’s real estate sector has 3 key segments: residential, retail, and commercial. Among these, the residential segment holds the lion's share, with around 80% of the country’s cumulative real estate market. Despite growing at such breakneck speed, the real estate industry faces various challenges. These include transparency issues, a lack of standardization, and a slow adoption of technology in the Indian market. These challenges are now finding a new vista of solutions with the advent of Fintech.
There are several ways in which fintech enterprises are contributing to the development and expansion of the real estate industry –
1. Eliminating Middlemen
Traditionally, buying or selling property involved numerous intermediaries, which raised complexity, delays, and costs. Fintech-driven transactions have streamlined this by cutting out the middlemen, which allows consumers to access home loans and other housing finance solutions more conveniently.
2. Predictive Algorithms
Fintech platforms use predictive algorithms to draw more precise property valuations with higher transparency. As this approach is data-driven, it provides buyers and sellers with real-time insights and helps them take informed decisions according to accurate market values. Additionally, it helps banks and NBFCs avoids any underestimation or overestimation in the value of properties.
3. Facilitating Secure Transactions
Considering the substantial sums involved in real estate deals, transactional security is paramount. Fintech has simplified and secured these processes by creating databases with higher security against hacking and other digital threats. With more transparent payments, it eliminates the need for agents.
4. Centralized Databases
Databases like the Central Registry of Securitization and Asset Reconstruction and Security Interest of India (CERSAI) and the Central Know Your Customer Registry (CKYC) have strengthened real estate financing by providing lenders with centralised critical information related to borrowers, properties, and other security information.
5. Paperless Processes
Fintech firms leverage innovative technology to assess customer profiles. These include digital verification methods like e-KYC, video KYC, and e-Signatures. This has made the entire home loan process paperless and user-friendly.
6. Consent-based Data Sharing
Digital initiatives like ‘Sahamati’ are revolutionizing the lending process by allowing borrowers to securely share their financial information with multiple lenders. This eliminates redundant paperwork and streamlines the loan application and disbursal process.
7. One-stop Solution
With fintech's intervention in real estate, companies can expand their services horizontally and vertically. These firms now offer a wide range of services, like leasing, acquisition, loans, and financial modelling for property financing. This makes them the one-stop solutions for investors and consumers alike.
8. Bridging Language Gaps
In real estate financing, the advent of advanced translation engines has brought a transformative shift. Fintech platforms use the latest technologies to digitise and seamlessly process paper documents, effectively eliminating language barriers. This enables borrowers to engage with lenders in their preferred local languages, simplifying the financing process.
The realms of real estate and fintech in India are intersecting in several meaningful ways. One such example is the emergence of fintech products and services specially tailored for the Indian real estate market. Companies are utilising technology like AI and ML to streamline the home buying process in India.
These firms leverage financial data analysis to enhance lending decisions and expedite the overall banking process. Moreover, real estate companies are collaborating with fintech entities to offer novel financial products or services. Taking an example from the Indian real estate landscape, a developer could collaborate with a fintech firm to provide asset management tools and digital payment solutions to their customers.
Fintech companies are making significant strides into the international real estate market, transforming banking processes. Through user-friendly digital interfaces and advanced algorithms, fintech firms connect homebuyers with suitable real estate financing options, ensuring a seamless and efficient lending process. This dynamic synergy between the two sectors is not only changing the landscape but also reshaping the future of India's real estate industry.