India’s housing finance market — a once-narrow stream is now maturing into a mighty river. It is expected to expand at a compound annual growth rate ( CAGR) of 20.58% from FY22 to FY31 , despite last fiscal reeling under key rate hikes and inflationary pressures. 

Beating all odds, the inherent demand for housing remains buoyant. As of March 2023, Housing Finance Companies’ (HFCs) had ₹7 lakh crore of Assets Under Management (AUM) comprising home loans and loans against property (LAP). The anticipated growth of this portfolio is expected to be between 12-14%, surpassing the previous estimate of 11-13%. I’d wager it to be even higher, given the AUM projections of certain key players in housing. 

The way HFCs do business has undergone a radical transformation — be it underwriting procedures, onboarding, or interaction with customers. They are increasingly becoming digital. Case in point, over 92% of new loan applications received at HDFC were through digital channels as opposed to less than 20% in the pre-COVID era. 

There are multiple reasons why digital makes sense for the mortgage sector: One, it provides a huge opportunity to access under-penetrated markets across India; two, there's a call for more transparency in the mortgage industry as well as pressure to control costs in mortgage originations; three, the sector’s regulator, National Housing Bank, is serious about IT governance as the housing finance industry matures and achieves scale.

Business rules engines have come to be a necessity for lenders to be able to endure regulatory demands, meet directives, and stay relevant. Here’s how:

1. Rapid implementation time Sentinel is an easy-to-use credit decisions manager that eliminates the need for manual intervention and accelerates the evaluation of various factors involved in mortgage transactions. 

   
   

   On Sentinel, rule changes are super easy to make , as it involves no coding at all. You can test and validate rules as and when you create them, thereby reducing scope for errors. Sentinel APIs are designed for low latency, shortening decisioning time significantly.

2. Scalability

   Sentinel is designed to effectively manage increasing levels of complexity and a growing volume of data or tasks. Additionally, its risk intelligence capabilities elevate impact analysis and help lenders understand market requirements and concentrate on relevant sectors or target groups. For instance, should a lender want to extend loans to new risk cohorts, risk teams can use a combination of Sentinel features to test new waters — from historical data-based simulations to testing in a live production environment ( Canary testing ) to running Champion/Challenger analysis . 

   This way Sentinel helps expand reach across geographies and social segments at a fraction of the cost normally incurred through office set-ups. As a result, lenders can channel these costs towards better customer services and more competitive pricing — lowering interest rates, processing fees, and other additional charges.  

   
   

3. Access to multiple sources of data

   Sentinel seamlessly integrates with diverse data sources relevant to mortgage decisioning. This includes credit reports, financial statements, employment records, and property details. To incorporate any new data source, be it proprietary, alternative, or a scorecard, into your mortgage decisioning process, you can utilise Sentinel's custom API function. This process is straightforward, requiring only the input of a curl command—no coding skills are necessary.

4. Exception handling and alerts

   Sentinel is designed to identify exceptions or anomalies in the data . When discrepancies are detected, the system generates alerts, prompting further investigation or corrective actions. This proactive approach helps in addressing potential issues early in the loan processing cycle.

5. Regulatory compliance

   Mortgage regulations are subject to frequent changes. Sentinel, given its flexibility, enables rapid adjustment to new regulatory requirements . This ensures that the mortgage processes stay compliant and up-to-date without causing delays in implementation. Further, Sentinel entails features that support IT framework specifications by NHB. Here are a few:

   1. Audit trail and compliance

      Sentinel maintains a comprehensive audit trail of data processing activities. The ability to trace data changes back to their source contributes to a robust and accountable decision-making process. In fact, Sentinel offers you an option to even roll back changes in a click. 

   2. Information security

      In response to guidelines set by the National Housing Bank regarding IT frameworks, our Information Security policy at FinBox emphasises fundamental principles like confidentiality, integrity, availability, and authenticity. This commitment to security is underscored by FinBox's achievement of SOC-2 Type II attestation.

   3. Role based Access Control (RBAC)

      Sentinel’s RBAC feature allows access to information based on well-defined user roles (maker, checker, etc.) This feature helps comply with NHB rules on delegation of authority for changing user profiles, permissions, and documentation of key business parameters (e.g. interest rates).

HFCs are increasingly shifting their energies toward developing innovative products, creating strategic partnerships with fintechs, and catering to lower-income customers grouped in unorganised sectors, all while minimising operational and customer acquisition costs .

In order to successfully execute these initiatives, HFCs need modernised business models, powered by a variety of new-age technologies. For seamless design, launch, and implementation of unique, customised products, they need tech partnerships that allow them to focus on the product and leave technological development to specialised players like ourselves. If you’d like to know how FinBox can support you in this journey, schedule a call with our experts .