Micro Housing Finance Corporation Case

Micro Housing Finance Corporation
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Author: Elisabeth Niendorf, Akshay Milap, Valerie Mendonca, Ajay Kumar Kathuria, Amit Karna
Pub. Date: 2023
Product: Sage Business Cases
DOI: https://doi.org/10.4135/9781529620061
Keywords: housing finance, loans, customers, corporation, business models, India, affordable housing,
finance, credit, equity (finance)
Disciplines: Financial Services, Finance, Business & Management, Insurance, Small Business Finance
Access Date: December 12, 2023
Publishing Company: Indian Institute of Management, Ahmedabad
City: London
Online ISBN: 9781529620061
Sage Sage Business Cases
© 2020
© 2023 Indian Institute of Management, Ahmedabad All Rights Reserved.

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Abstract
This case describes the evolution of the Micro Housing Finance Corporation (MHFC), a player in the
informal housing sector in India. From being a new entrant that offered micro home loans to the finan-
cially excluded lower-income families of urban India in 2006, MHFC had grown to offer 18,000 loans
per year that were worth INR 8 billion, with an average ticket size of INR 0.43 million (USD 6000). With
a 53.5% purchasable equity stake in MHFC, the co-founder Chopra and his team had to make some
decisions. Should the company onboard a new social investor? Or should it bring on the more readily
available and capital-rich private equity investors who were interested in the lucrative prospects of the
microfinance housing sector? The case discussion has two key objectives: (1) to understand the en-
tire entrepreneurial journey of a group of entrepreneurs and how they plan to exit the venture, and (2)
to enable a classroom discussion on how to develop a business model from scratch, obtain funding,
achieve scale and then exit.
Case
One evening in the first week of January 2018, Inderjit Chopra1, 48, Managing Director of Micro Housing
Finance Corporation Limited (MHFC), was seated in his chair as he stared at the figures on the office white-
board. Having finished a meeting with his co-founders Sriram Iyer, 62, and Amit Gupta, 30, Chopra began to
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mull over options for the future direction of MHFC. Outside the room, movers were packing everything from
furniture to files and folders into brown boxes and taping them shut. MHFC was finally moving to a new, big-
ger office in a western suburb of Mumbai. As the organization had grown, it had been operating out of four
different locations in Mumbai, and it was now time to bring the entire team together in one place.
In 2008, Chopra, Iyer, and Gupta had co-founded MHFC as a company that offered micro-home loans to the
financially excluded lower-income2 families of urban India. Over the past 10 years, MHFC had grown from
offering 500 loans per year to offering 18,000 loans per year that were worth INR 8 billion, with an average
ticket size of INR 0.43 million (USD 6000). The start-up had received seed funding from the Michael & Su-
san Dell Foundation (MSDF) and the India Financial Inclusion Fund (IFIF) in 2009. In 2013, it managed to
raise an additional amount of INR 380 million in equity funding collectively through MSDF, IFIF, and a new
investor, Unilazer Ventures.3 By December 2017, MHFC had 19,000 satisfied customers and INR 3.6 billion
in outstanding loans. It had been a long journey for everyone involved, yet one that was far from over. The
primary investors (MSDF and IFIF) who had been with MHFC for close to 10 years, almost as long as the
firm had existed, were now looking to exit before the end of the financial year. MSDF and IFIF had a 10% and
36% equity stake, respectively, in the company. Unilazer, which held a 7.5% stake, was also considering its
options.
With a 53.5% equity stake on the table, Chopra and his team were left with urgent decisions to make. Should
the company look for and onboard a new social investor? Or should it bring on the more readily available and
capital-rich private equity investors who were interested in the lucrative prospects of the microfinance housing
sector? Also, given MHFC’s growing ambition to scale, could Chopra and his team pursue the option of sell-
ing the business to a large, established housing finance company, such as the Housing Development Finance
Corporation (HDFC)? Chopra and his co-founders had built MHFC from the ground up with a strong vision of
catering to the housing needs of the urban poor. At the start, they had set out to prove that an inclusive market
for micro-mortgages could exist and could be financially sustainable. Before MHFC was established, micro-
mortgages did not exist in India. Over the years, MHFC had been successful in creating a proof of concept
for investors who wanted to enter this market and scale it. Thus, Chopra and his co-founders had established
themselves as pioneers in this industry. As Chopra reflected on the entire journey so far, the movers packed
away the last of the boxes. He realized that the next phase would be a new beginning, and not just in terms
of a new office location.

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India’s Informal Housing Sector
In 2007–08, India’s urban population was growing at an alarming rate of about 2.6% per year4. The population
was projected to reach 500 million by 2020 (an increase from 350 million then)5. Rapid urbanization was also
accompanied by rising incomes and an expansion of the middle class. The growth in the housing sector, how-
ever, was barely keeping pace with the resulting unprecedented growth in demand for housing. There was an
estimated shortage of nearly 25 million homes.6 The informal sector, comprising individuals from economical-
ly disadvantaged sections and lower-income groups, accounted for 99%7 of the population experiencing this
urban housing shortage. According to estimates, the low-income or “affordable” housing sector in India, at the
time, was worth USD 100 billion and was expected to grow to USD 1 trillion by 2025. And yet, most housing
companies and Housing Finance Companies (HFCs) continued to look away when dealing with the subject
of developing low-cost projects or providing access to adequate finance to first-time home buyers.
While there were many dimensions to affordable housing, a subset of characteristics, which were more pro-
nounced for the urban poor, contributed to the huge demand-supply gap in this space. Firstly, a significant
proportion of the urban poor resided in “squatter” settlements such as slums or other forms of informal tene-
ments with little or no access to basic facilities like clean water, sanitation, electricity, and waste management.
This situation prevented them from possessing or even acquiring adequate property rights or land titles. Sec-
ondly, most individuals from this category were employed in various informal, and often unconventional, pro-
fessions. Some of them, for instance, were self-employed marble statue makers, paan (betel) shop owners,
rickshaw pullers, welders, and shoe sellers. Such employment in the informal sector was often characterized
by low income or, in some cases, the lack of a regular and assured income; in most cases, the income was
undocumented.
In the absence of adequate credit history, bank accounts, or any documentary evidence to assess the income,
identity, or ownership rights of such individuals, most financiers found the small-ticket loan underwriting
process for this segment to be tedious, risky, and unrewarding. For each applicant, financiers were required
to capture information (nature of work, cash flows, assets, repayment capability) that was relevant to assess
the applicant’s creditworthiness; this information needed to be obtained through a detailed field-based cred-
it assessment and verification processes. As a result, most traditional banks or financial institutions found it
difficult to lend to this segment and, therefore, preferred to stay away. Even if they managed to overlook the

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paperwork and stretch themselves on occasion, the lack of long-term money prevented them from lending
at “affordable” rates. Most microfinance institutions (MFIs) had only two- or three-year money, which, even if
they were willing to lend for mortgages, came at a cost of 18-19%. Consequently, it was a real challenge for
individuals from the low-income group to secure a 15- or 20-year home loan from formal institutions. These
individuals eventually borrowed from local informal moneylenders at usurious rates or, in some cases, even
abandoned their dream of owning their first home despite their willingness, intent, and ability to service the
debt.
At the supply end, growth within the affordable housing space was marred by the inability of the state to create
an enabling ecosystem for builders and developers (especially private players) owing to poorly conceived
regulations and a lack of policy incentives. The affordable housing sector in India was fraught with several
challenges, such as scarcity of land at affordable rates, complex land laws (land registry, consolidation), high
construction costs, low value of returns, high FSI (floor space index) premiums, high stamp duties, limited
tax concessions, and excessive cost and time required for permissions and clearances. All of these factors
together contributed to the continuous struggle to own a home that was experienced by a majority of India’s
urban poor at that time.
Formation of the Core Team
In 2007, Chopra and Iyer lived in Mumbai. They had been friends for over a decade. After long stints in bank-
ing, both were looking for an opportunity that would allow them to combine their earlier experience in finance
with their interest to help people who were economically and socially disadvantaged. Driving through the con-
gested streets of Mumbai, Iyer and Chopra’s attention had often been caught by visuals of men, women,
and young children living in the shanty towns of the city. These individuals were trapped in appalling circum-
stances—struggling to make a living and caught in a vicious circle of poverty. However, from their exchanges
with drivers and security staff of the banks for which they had worked, Iyer and Chopra knew that there were
differences among people who lived in slums. Although they resided in slum areas, many people had stable
jobs, earned regular incomes, and wanted to own a house outside their current areas of residence. Chopra
and Iyer were moved by the fact that trustworthy drivers who provided their services to banks (in other words,
bank employees) were not able to access any bank loan themselves. They soon realized that these cases
were not exceptions; securing a home and arranging the necessary finance was a real challenge faced by a

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majority of the urban Low-Income Groups (LIGs)8 in India.
At around this time, Ashish Karamchandani, founder of Monitor Inclusive Markets (MIM)9 and a close friend of
Chopra and Iyer, invited them to speak at a conference on the topic of the growing crisis of affordable housing
in India. During that conference, Chopra and Iyer stressed on the critical need to provide access to sustain-
able housing finance for low-income households. Geeta Goel, Country Director, Impact Investing, Michael &
Susan Dell Foundation (a global philanthropic giant), and a participant at the conference, took note of Chopra
and Iyer’s sharp observations and keen insights. Goel, at the time, was looking to expand the foundation’s
India operations in the financial inclusion space. She offered the duo a grant from the Dell Foundation to pilot
a housing finance company that could focus on providing housing loans to financially excluded urban lower-
income families.
At around the same time, Chopra and Iyer were contacted by Amit Gupta, a friend’s son, who wanted to
quit his overseas bank job and return to India. Gupta had also long harbored a dream of working towards
creating sustainable social impact. Together, Chopra, Iyer, and Gupta co-founded MHFC in 2008. In 2009,
Chopra roped in another friend of theirs, Sudarshan Patil, 62, who had worked for his own construction com-
pany that developed housing for low- and middle-income buyers. Patil had a cumulative experience of more
than 30 years in the real estate and housing finance sector; he joined as Director, of Projects. In addition,
the team was approached by Kuljeet Arora, 49, who, at the time, was a senior professional at HDFC, India’s
leading housing finance company. With a career spanning 20 years, Arora had served in a variety of roles at
HDFC—from helping set up HFCs in Sri Lanka and Indonesia to leading HDFC social development projects
in microfinancing, housing, and social infrastructure. He was familiar with various credit and lending issues
associated with housing finance, especially for lower-income groups. In May 2009, he joined the initial team
in the capacity of Director, Credit, and Operations. Despite their different backgrounds and personalities, the
team members were united by their common ideas about the future of affordable housing in India. Chopra
explained:
We wanted to create and support the ecosystem of affordable housing and financial inclusion. And
in doing so, we wanted to prove the concept that lower-income families were equally credible in ful-
filling their home loan obligations (despite the lack of documentary evidence), and that lending to
this segment served as a viable business opportunity apart from solving the massive housing crisis
in India.

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MHFC’s Growth
According to Chopra, MHFC was started with a strong social mission:
It’s enshrined in our articles that we will provide home loans to financially excluded lower-income
families only. We were set up to help people from the lower-income (category) to own a home.
Incorporated in May 2008, the company applied for approval from the regulatory body National Housing Bank
(NHB); the approval was obtained in early 2009. The company sanctioned its first loan in May 2009. The same
year, it partnered with 20 real estate projects in Mumbai, Pune, Ahmedabad, and Kolkata. As of 2017, MHFC
had operations that spanned six states—Maharashtra, Gujarat, Madhya Pradesh, Rajasthan, West Bengal,
and Chhattisgarh (Exhibit 1a)—and included 13,405 sanctioned loans (amounting to INR 5685 million), out
of which 10,972 loans were disbursed (Exhibit 1b).
The Housing Loan Process
According to Chopra, the functioning of MHFC was considerably similar to that of mainstream housing finance
institutions, except for the type of customers that it catered to.10 The customers of MHFC were generally
people who belonged to the Economically Weaker Sections (EWSs) or LIGs11 of India’s urban population.
Although the maximum available loan amount was INR 1.5 million, the average loan size in MHFC’s portfolio
was INR 0.5 million. Although the maximum repayment time was 15 years, most customers completed their
repayment before time. Taking a more risk-averse approach, MHFC offered loans for 85% of the value of the
house, whereas the Reserve Bank of India (RBI)12 allowed home loans for up to 90% of the value of the
house13. The rate of interest floated between 12% and 13% and was constantly revised in accordance with
RBI’s changes to the Prime Lending Rate (PLR).14 Document charges ranged between INR 500 and INR
1,000, and transaction charges ranged from INR 150 to INR 500; late payment charges were 2% per month
on the amount due.15 To obtain the loan and repay installments, customers were expected to have a valid
bank account. Further, they were expected to buy life insurance to protect the family in case something un-
expected happened to the family’s main income earner. MHFC staff and loan officers assisted with both the

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tasks—opening a bank account and buying insurance.
In contrast to a typical finance company, MHFC maintained a close relationship with its customers (Exhibit
2). When customers enquired about a home loan, they were put in touch with a loan officer who would accom-
pany them to their home and conduct an in-depth survey of various factors, such as their living conditions,
family income, the reason for moving into a new house, and ability to repay installments. This procedure was
crucial in getting a clear picture of the customer’s declared ability to repay installments and was documented
in a digitally formatted “storyboard”. On average, it took about one week to verify all customer details and
complete the storyboard. Roshan Joshi, a credit officer explained:
In a nutshell, it is like why he needs a house, what is his income like, maybe say he is a chaiwala
[tea vendor], so daily how many cups of chai [tea] he sells, how much milk, how much sugar, how
many employees does he have. Then does he have any loans, does he have any assets, maybe
a two-wheeler, maybe a refrigerator (…). And then the property which he wants to buy, how much
money he is putting in the property, and how much loan does he want. (…) We have completely
shifted to a paperless model (…) a multimedia file. It is like pictures, it is audio, and videos.
Although every customer visit was costly in terms of employee time and transportation costs, MHFC preferred
that the local office staff thoroughly understood the customer’s profile as well as their ability and willingness
to repay the loan. MHFC wanted to obtain assurance about the integrity of the customer, as explained by the
credit officer Joshi:
We will listen to his story, we will look at the whole holistic picture of the case (…) before we go
ahead. If he lies to us, if it is his friend’s (tea) stall and he is standing there just for the picture, we
will come to know.
Subsequently, the loan application needed approval from any two members of the credit committee, which
comprised six members (the co-founders Iyer, Gupta, and Chopra; the head of the credit department, Arora;
and two officers from the finance department). In case of a rejection of the amount applied for, the committee
tried to sanction a lower amount. However, if a customer was found to be eluding meetings with the credit/
verification officers or if any information was found to be untrue, the loan was rejected outright. If the loan was
approved, it was usually sanctioned within 7 to 14 days, with disbursal depending on the stage of construction
and demand from the developer.

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Customer Outreach
MHFC distributed leaflets in slum areas, vegetable markets, and large industrial complexes. Sometimes, its
sales staff even set up a desk in the lunchroom of a luxury hotel to target the hotel’s cooks, waiters, and
mechanics.16 Reaching out to customers was not easy, as typical channels of promotion (newspaper or ad-
vertisements) were not suitable for MHFC’s specific customer group. As one of their credit officers elaborated,
“Most people who come to MHFC (come) through word of mouth.”
Furthermore, builders played a crucial role in reaching out to customers as they were the people who market-
ed apartments to their clients and recommended that MHFC provide the financing options. Narrowing down
on the “right” customers for MHFC was not always a straightforward process. Arora, the Head of Credit, ex-
plained the dilemma:
It is hard. Now it wasn’t hard three years back. (…) But now we are in that growth stage of our prod-
uct. So to grow we have to get a few high-ticket loans as well. We can’t be doing one Lakh loans
(only). Then the investors will be like (…) “It’s not amounting to anything.” But my job is to get a bal-
ance (in social and commercial aspects).
People Management
Over the years, MHFC shifted from hiring people with a banking background to recruiting fresh graduates with
a social background. Although employing staff with a financial background was beneficial for quick growth in
sales, the management team soon realized that this choice did not align with MHFC’s social objectives. The
mindset required for carrying out rigorous fieldwork in the slums was very different from the mindset required
for the work routines in a traditional bank, and thus, the rationale behind working at such a place also differed.
Therefore, MHFC changed its focus and started to recruit employees from socially oriented colleges through
campus placements. Students from Tata Institute of Social Sciences, Mumbai, and Azim Premji University,
Bangalore, were among the recruits in the year 2017. Employees received competitive pay packages, in line
with sector offerings. Additionally, although education in a social institution was preferred, MHFC did not insist
on a graduate degree17 as a criterion and occasionally recruited undergraduates18. MHFC employees were
trained to handle multiple roles. As Bhavna Shah, head of Human Resources, described:

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So everyone will get the same kind of training, irrespective of their role – whether joining in the sys-
tems team in Mumbai or as a LO [loan officer] in Ahmedabad. (…) Because we want a lot of role
rotation, so we train everyone on everything.
Culture and Values
MHFC promoted a culture of openness, integrity, and collaboration among team members. Patil described it
in the following way:
Our work areas are the same as those of our employees… This makes all the difference (…). Why
are we so informal? This whole segment is informal. So you can’t be doing (certain) things (…) and
preaching (…) and practicing something else.
Employees were expected to function with integrity and commitment. They were supposed to be present at
their workstations during office hours. There was no punching machine to track employee attendance. Some-
times, when employees completed their tasks for the day, they would leave early. MHFC had a zero-tolerance
policy towards the practice of employees taking bribes for approving home loans (a common practice in In-
dia); if any employees were found guilty, they were immediately fired. Moreover, employees at MHFC were
expected to be self-motivated. Loan targets were not defined, and employees were expected to contribute
their best to the job. In this regard, an employee stock ownership plan (ESOP), which MHFC had for all its
employees, was a key measure to make everyone feel like it was their own business. The offer of ESOPs
motivated employees to act in the long-term interest of the company; this approach was in contrast to behav-
ior guided by short-term considerations and typically promoted by sales incentives, which MHFC abolished.
Shah recalled:
Like earlier, we used to have incentives for employees. (In) sales (typically) you have incentives. (…)
So it’s very difficult for people to shift (…) to a phase where there is no incentive, only a fixed salary.
So people have to be really motivated from within to actually work (for MHFC).
MHFC claimed to adopt fair practices in its interaction with customers and emphasized confidentiality with
regard to client data. It had a system for lodging complaints at all its branches and also had a toll-free number
that customers could call to lodge complaints about MHFC’s services or interactions.

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Investors
Given that MHFC was set up as a social enterprise, its initial investors were all socially oriented. Its early fun-
ders were the India Financial Inclusion Fund (IFIF) and the Michael & Susan Dell Foundation (MSDF), which
invested in it as early as 2009. IFIF was started in 2008, and its objective was to fund companies in the fi-
nancial inclusion space—companies that provide microfinance and access to other financial services, one of
which is affordable housing. MSDF set up its India office in 2006; one of its objectives was to boost aspirations
among the urban poor, especially youth, by enabling them to access financial products. Unilazer Ventures, a
venture capital firm owned by Ronnie Screwvala, a popular entrepreneur, media tycoon, and philanthropist,
made a significant investment in MHFC in 2013. Overall, a majority of the stake in MHFC was held by social
investors (Exhibit 3). According to Chopra, seeking social investors to invest in the company was especially
important when they had started out. He said:
Financial investors are only driven by one thing and that is their return. And you know it’s fair. That
is a transparent thing. (…) But you know, when you are running a business, you may have to take
many decisions which are not like you know financially worth it today (…) So I think a social invest-
ment is not driven to make some change immediately to maximize its money. (…) Like Dell Foun-
dation will not tell me to, let’s say, fire 20 staff because they are not immediately giving returns. If I
tell them, no, it is going to take two or three years to develop that kind of return, they may be more
willing to make that investment because they don’t want their money back necessarily so quickly.
Project Partners
MHFC had partnered with several real estate project builders. Chief among these were Tata Housing and De-
velopment Company Limited and Poddar Developers.19 By May 2017, MHFC had partnered on 550 housing
construction projects; about half of these projects were in affordable housing schemes of the government. Al-
though the terms and agreements with different project partners varied, MHFC tried to ensure the presence of
a physical desk at the site office of every partner. All customer enquiries for loans were directed to this desk.
Some project partners had agreed to reserve 60 to 100 residential flats (per project) exclusively for customers
of MHFC.

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There were several reasons for the establishment of project partnerships. MHFC wanted to ensure that its
target customer was not disappointed. So it partnered with well-known developers who had a reputation for
completing projects on time and executing them according to relevant planning permissions and regulations.
The project team at MHFC included many civil engineers; they were present at project sites and followed up
on the progress of the construction. Sometimes, they also scouted for new projects or construction taking
place within city limits or in remote suburbs. As Chopra said, “They are an important link between MHFC and
its partners and always have their eyes on the groundwork.”
Regulatory Infrastructure
NHB was the regulatory body for all housing finance institutions in India and included commercial as well as
public HFCs. It was formed in 1988 after the government realized the need to boost finance in the housing
sector, which was in danger of stagnation.20 NHB functioned as an apex body and was a 100% subsidiary
of the main financial regulator, the RBI. In addition to its regulatory role, NHB promoted access to housing fi-
nance, especially to rural and middle-level income groups.21 As of June 2018, 95 HFCs were registered with
NHB.22 The agency issued regular guidelines, reviewed interest rates, and issued ordinances to regulate the
housing finance sector. As part of its objective to promote HFCs, it provided refinancing under specific terms
and conditions23, with a focus on areas such as housing for EWSs and LIGs. NHB was a primary lender to
MHFC, and MHFC had to function within the guidelines and procedures prescribed by NHB. Maintenance of
cordial working relations with NHB was a key component of the company’s strategy.
Competitors
At about the same time as MHFC, other players had also entered the housing finance market. In 2010, the
housing finance market was dominated by five public and private HFCs and commercial banks (Exhibit 4).
Experts estimated that approximately 60% of the share of retail home loans in India was being offered by
these five companies, with other companies offering the remaining share.24 Some of these other companies
were Indiabulls Housing Finance and Dewan Housing Finance Corporation. Mahindra Rural Housing Finance

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Limited (MRHFL) had been started in 2007 to provide smaller loan amounts for rural people.25 It had part-
nered with government construction projects under the Pradhan Mantri Awas Yojana scheme for affordable
housing and had obtained access to 1100 locations across India.26 Tata Capital Limited, which had been es-
tablished in 2007, had started “Prapti” loan schemes to cater to the lower- and middle-income groups, and
had grown to nearly 50 projects across India by 2017.27
During the past decade, mainstream HFCs with existing licenses had also been turning to service the afford-
able housing sector. An example of such an HFCs was the India Shelter Finance Corporation Limited (IS-
FC)28. ISFC was re-launched in March 2010 from an earlier business called Satyaprakash Housing Finance
India Limited (SHFIL), which had been granted a certificate of registration by NHB on October 26, 1998. The
aim of ISFC was to cater specifically to middle-income families by providing home loans of up to INR 2 million
for 20 years. Other examples of such HFCs were AU Small Finance Bank, Aptus Housing Finance, Home
First Finance, and Aadhaar Housing Finance.
Credit cooperatives such as the Mahila Housing Trust set up by the Self Employed Women’s Association
(SEWA) in the late 1990s provided home loans as part of their services in microfinance and women’s em-
powerment.29 However, cooperatives had a very small market share of about 0.5% of the total home loan
segment.30 A private player that had entered the market more recently was ART Affordable Housing Finance
Limited; it was started in 2016 and offered home loans and other loans to lower- and middle-income groups31.
In August 2017, Axis Bank launched “Shubh Aarambh Home Loans” to target the growing demand for afford-
able housing32. Although many players had entered the market for affordable housing, Patil, Director, Pro-
jects, was proud that MHFC had been one of the first companies in this market:
Frankly, I am proud to say we were the pioneers in this. Now there are plenty of guys, which is fine.
But it’s always good to be the first one. Like they say - if you ask anybody who landed on the moon
first, they will say Neil Armstrong. Who landed on the moon second? Nobody remembers.
What’s Next?
As MHFC geared towards celebrating its 10th anniversary in mid-2018, it stared at the possibility of the exit

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of two of its longest-serving investors—IFIF and MSDF. With an association of nearly 10 years, the initial in-
tent to help develop an ecosystem and provide a proof of concept for affordable housing finance had been
achieved. As Goel, the India Head of MSDF, highlighted:
It’s been a long journey for us, it’s been almost 10 years. Two-three years before we invested in MH-
FC, we had invested in some other MFIs which are very big. MHFC has done well but I mean … are
they industry leaders today? No. Are they industry pioneers? Definitely. Are they the most socially
impact-oriented in terms of the target segment at their interest rates? Definitely. Now that the model
is proven, at least they can talk to financial investors, who wouldn’t have looked at MHFC earlier.
Now you know this model works so the choices are very different.
Seated in his chair, Chopra contemplated the possible directions for his company’s future. The decision would
affect not only the company’s future but also its employees, co-founders, and customers. MHFC had been
started with a specific mission—to provide housing finance for lower-income households and prove that such
a company could be sustainable. The decision could also affect the vision. Chopra explained:
It is not just my decision. I think I have to weigh this against what everybody else wants. I also have
my partners’ requirements. I have been explaining that one of my partners is 60 years old. And one
is quite young. He is about 30; joined us when he was 22. So his own aspirations have to be looked
into as well. He may not necessarily want a 100% buyout because the new owner may not want
the top management team at all. So yes, we will get a cheque for our stakes in the company. (…)
the older promoters, me and Iyer, may be fine with that. Because I believe, even though I am old-
er, that it is more important that the mission has been achieved and that has been done. While the
younger promoter may feel that there are a lot more legs in the company. He may think that it can
be taken public in five years. My job is to marry everybody’s aspirations. My promoter partners, my
investors… it’s not just one person. It is not one way of thinking. It could be three ways of thinking at
the very minimum because there are three big investors. I have to carry them along with whatever
decision I take. I have to carry along the promoters. I have to carry along my employees, particularly
the senior employees, who may lose their jobs in this. So it’s not just my decision. Certainly, I have
my own aspirations of course. But it’s more about managing everybody’s thought processes and ul-
timately what’s best for the company as a whole and even bigger picture, what’s best for the industry
as a whole? What’s best for the customer?
Many key questions needed consideration. Should they even look for investors to replace IFIF and MSDF?

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What type of investors should MHFC look at—social impact investors, more commercially minded private eq-
uity/venture capital investors, or non-banking financial company (NBFC) MFIs that were focussed on financial
inclusion (such as Ananya Birla’s Svatantra, which had a large rural customer base and wanted to offer hous-
ing loans to rural customers), thereby extending MHFC’s urban reach to rural areas? Would bringing on such
investors dilute its social mission? Given that social investors were few in India and invested limited funds,
could it even find a sizeable investor to back it? Could MHFC try to approach and sell the business to a large
financial institution such as HDFC and become its subsidiary? Such a company would have the reach and
the financial possibilities to scale the business. Although such an action would be like giving away their baby
and they would lose control over MHFC, the step could, in all possibility, lead to greater and faster growth.
As Chopra thought about all these options, the clock struck 9 and he realized that it was getting late. He want-
ed to give the decision more thought and discuss it with his partners and core team. He decided to call it a
night and revisit the questions in the morning, with a fresh mind.
Notes
1. 1. Names changed to protect identities
2. 2. Households whose annual income is in the range INR 0.1–0.6 million
3. 3. McGowan, M. (2013, October 9). MICROCAPITAL BRIEF: Micro Housing Finance Corporation (MHFC)
raises $5.6m in equity from Michael and Susan Dell Foundation, India Financial Inclusion Fund, Unilazer Ven-
tures. MicroCapital. Retrieved September 3, 2020, from https://www.microcapital.org/microcapital-brief-micro-
housing-finance-corporation-mhfc- raises-5-6m-in-equity-from-michael-and-susan-dell-foundation-india-fi-
nancial-inclusion-fund-unilazer-ventures/
4. 4. The World Bank. (2018). World Bank staff estimates based on the United Nations Population Division’s
World Urbanization Prospects: 2018 revision [Infographic]. Retrieved September 3, 2020, from https://da-
ta.worldbank.org/indicator/SP.URB.GROW?end=2010&locations=IN☆t=2005&view=charthttps://data.world-
bank.org/indicator/SP.URB.GROW?end=2010&locations=IN☆t=2005&view=chart
5. 5. The World Bank. (2018). World Bank staff estimates based on the United Nations Population Division’s
World Urbanization Prospects: 2018 revision [Infographic]. Retrieved September 3, 2020, from https://da-

Page 16 of 19
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ta.worldbank.org/indicator/SP.URB.GROW?end=2010&locations=IN☆t=2005&view=chart
6. 6. India Microfinance.com. Housing shortage in urban India at 24.71 million dwelling units. Retrieved Sep-
tember 3, 2020, from https://indiamicrofinance.com/housing-shortage-urban-india-2471.html
7. 7. JLL. (2012). Affordable Housing in India 2012 Report. Retrieved September 3, 2020, from
http://www.jll.co.in/india/en-gb/Research/Affordable_Housing_in_India_2012.pdf
8. 8. Households whose annual income is in the range INR 0.3–0.6 million
9. 9. Founded in 2005, Monitor Inclusive Markets (MIM) served as a dedicated social action unit within Monitor
Deloitte (a global strategy consulting practice). Over the years, the MIM group had worked extensively in the
low-income housing space with a variety of stakeholders—ranging from established players to entrepreneurs
and developers, as well as the government.
10. 10. How to Start a Startup IIM Ahmedabad. (2017, October 7). How to start a startup 2.0| Session 2 –
‘The MHFC story’, Rajnish Dhall | Social entrepreneurship [Video]. YouTube. Retrieved September 3, 2020,
from https://www.youtube.com/watch?v=WHDSrDJykdU
11. 11. EWSs and LIGs are defined as those people whose family income is between INR 0.1 and 0.2 million
annually.
12. 12. The financial regulator in India
13. 13. Sethi, A. (2019, July 29). What is an LTV ratio and how does it determine home loan eligibility? Hous-
ing.com. Retrieved September 3, 2020, from https://housing.com/news/ltv-ratio-determine-home-loan-eligibil-
ity/
ity/
ity/
16. 16. nshelgikar. (2009, September 7). Nachiket Shelgikar on CNBC - Young Turks [Video]. YouTube. Re-

Page 17 of 19
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trieved September 3, 2020, from https://www.youtube.com/watch?v=XsHNECvApCE
17. 17. Bachelor’s degree
18. 18. People who have completed higher secondary education
19. 19. Samhita CSR Case Study. (2018, August 8). Micro Housing Finance Corporation (MHFC) - affordable
housing for the financially excluded. Retrieved September 3, 2020, from http://www.samhita.org/micro-hous-
ing-finance-corporation- mhfc/
20. 20. National Housing Bank, About Us. (n.d.). National Housing Bank. Retrieved September 3, 2020, from
https://nhb.org.in/about-us/#Genesis
21. 21. National Housing Bank, About Us. (n.d.). National Housing Bank. Retrieved September 3, 2020, from
https://nhb.org.in/about-us/#Genesis
22. 22. Srivats, K.R. (2018, June 1). Two more HFCs get NHB nod to commence business. The Hindu Busi-
nessLine. Retrieved August 8, 2018, from https://www.thehindubusinessline.com/news/real-estate/two-more-
hfcs-get-nhb-nod-to- commence-business/article24055330.ece
23. 23. Dhawan, S. (2017, December 22). NHB amends rules: Home loan finance companies likely to cut
interest rates. The Economic Times. Retrieved August 8, 2018, from https://economictimes.indiatimes.com/
wealth/personal-finance-news/nhb-amends-rules-home-loan-finance-companies-likely-to-cut-interest-rates/
articleshow/62194510.cms
24. 24. Housing finance firms account for 2/5th of home loan market. (2013, December 31). Business Stan-
dard. Retrieved August 8, 2018, from https://www.business-standard.com/article/finance/housing-finance-
firms-account-for-2-5th-of- home-loan-market-113123000753_1.html
25. 25. About us | Mahindra Home Finance. (n.d.). Mahindra Home Finance. Retrieved September 3, 2020,
from https://www.mahindrahomefinance.com/who-we-are/
26. 26. About us | Mahindra Home Finance. (n.d.). Mahindra Home Finance. Retrieved September 3, 2020,
from https://www.mahindrahomefinance.com/who-we-are/
27. 27. Affordable housing finance - Prapti home loan solutions by Tata Capital. (n.d.). Tata Capital. Retrieved
September 3, 2020, from https://www.tatacapital.com/home-loans/affordable-housing-finance.htm

Page 18 of 19
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28. 28. India Shelter website. Retrieved September 3, 2020, from https://www.indiashelter.in/
29. 29. Mahila Housing SEWA Trust website. Retrieved September 3, 2020, from http://mahilahous-
ingtrust.org/#Housing
30. 30. [msahoo2k@gmail.com]. (2013, November). Housing finance market in India Finance essay. Uni
Assignment Centre. Retrieved September 3, 2020, from https://www.uniassignment.com/essay-samples/fi-
nance/housing-finance- market-in-india-finance-essay.php?vref=1
31. 31. Company profile. (n.d.). ART Housing Finance. Retrieved August 8, 2018, from https://www.arth-
fc.com/about-us- company+profile.html
32. 32. ZeeBiz WebTeam. (2017, August 17). Shubh Aarambh Home Loans: Axis Bank to ‘waive’ some of
your EMIs. Zee Business. Retrieved August 18, 2021, from https://www.zeebiz.com/companies/news-shubh-
aarambh-home-loans- axis-bank-to-waive-some-of-your-emis-21521
33. 33. Credit Information Bureau (India) Limited (CIBIL) is a credit bureau or credit information company,
which maintains the records of all the credit-related activities of companies and individuals, including informa-
tion related to credit cards and loans.
https://doi.org/10.4135/9781529620061

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