Giving loans is a risky business. Banks go through credit history, CIBIL or other credit scores, earning potential and property value, among many other things before they approve loans to hedge themselves from the risks of default.
To help lenders ease the trouble of property valuation for mortgage-based lending is Navanc Datasciences. Founded by Nagachethan S M in 2021, the Bengaluru-based startup is building creditworthiness score to properties and assets.
What CIBIL is to individual credit worthiness, Navanc is aiming to do it for real estate properties.
As of now, the startup’s customers include fintech and a few non-banking lenders, including Vistaar Financial Services and APAC Financial Services. It has done over 500 property evaluations so far, mostly in Tamil Nadu and Karnataka.
How it started?
After working as a banker for 14 years, Nagachethan saw assets being underwritten while providing loans to micro, medium, and small enterprises (MSMEs) in rural and semi-urban areas and housing in urban areas. This involved asking for a lot of documents and evaluating them.
In his experience, “the trickiest part is to see the documentation of legal aspects of the property,” Nagachethan tells YourStory.
Usually, borrowers or customers find it difficult to get proper documents with the analysis and valuation of the property to send it to the banks and financial institutions. Sometimes, they do not have proper documents with them. And even if they do, these documents are often not updated and there are property transfer issues in case it is inherited.
Because of this, “there is a lot of confusion whether to underwrite or mortgage a certain property or not,” he says.
Banks rely on their own team of valuers and lawyers for the evaluation of property.
However, he says, “there is no standard evaluation methodology for properties and both the reports–the lawyer and valuer reports–that we trust today are subjective. There is a lot of grey area on the assessment.”
In Nagachethan’s experience of working at fintech Navi Finserv, Vistaar Financial Services, his team would sometimes have to disapprove giving a loan because of lack of clarity on the property.
He realised it was a very tricky issue to decide on loan commitment for the customers. “I felt there is a need to homogenise the kind of property assessment (that was done) across the country,” he says.
This led him to start Navanc in June 2021 with an aim to make the mortgage loan journey better.
Challenges
The problem before Nagachethan was that land is a state subject, and every state will have different rules and regulations. He intended to come up with a uniform framework to standardise evaluation of lands across the country.
The solution he was led to was a quantitative assessment of the property–a comprehensive score to evaluate, which he called Navanc.
The startup decided to take information from legal and valuation reports that are done with the same parameters that banks needed. However, it would also add more information taking into account where the property was, how marketable it was, and what area it was in, among others.
Banks hire valuers and lawyers to assess a land or a property who go to the location, assess it, and generate a qualitative report. The documents are passed in person or through emails.
“Again, analysing that report and then assimilating the information given in that report is left to the credit manager,” says Nagachethan.
The approval usually boils down to how much of a risk a credit manager is willing to take in each case?
“This is very qualitative in nature,” he adds.
Offerings
The startup has two offerings: Navanc, a property credit score; and VALLE, a curated platform of lawyers, valuers, and service providers.
To be used for credit underwriting or assessments, Navanc–the creditworthiness score–is calculated on 60 different set of parameters, clubbed under five indices:
1. Geospatial index: It considers geographical data of the property, sensitivity towards hazards, and also uses data from geospatial satellites to verify what the valuer is saying.
2. Marketability index: It considers factors such as ease to repossess, resale value, and property deviations, among other things.
3. Mortgageability Index: It factors legal aspects and normalises state specific records.
4. Digital Records Index: It captures the digital footprint of the property.
5. Livability Index: It captures amenities and value add-ons.
Navanc’s clients pay for a subscription based on the number of users and number of reports they use it for.
The startup collects this information from the government or open databases, and has tied up with a few businesses like Skyserve.ai and CrimeCheck.ai among others to validate the documents and data.
Navanc has also added over 150 lawyers and valuers from Tier II and III cities to its platform and made this into a separate offering–VALLE, a business-to-business service. Its clients can get their property valuation done by connecting on this platform and Navanc gets a 10% cut on what lawyers and valuers earn.
Market and funding
The real estate sector in India is expected to reach $1 trillion in market size by 2030, up from $200 billion in 2021, and contribute 13% to the country’s GDP by 2025, as per IBEF.
Navanc was started with an initial investment of Rs 2 lakh, and in principle grant approval from CIIE.co.
In June 2022, the startup raised $300 in seed round of funding from investors including Kunal Shah of CRED, QED Innovation Labs, Chattanathan D of Arya.ag, Samit Shetty of Chaitanya Microfinance, and Subramanya SV of Fisdom, among others. Currently, it has a team of eight members.
With the funding, the company said it plans to ramp up its product and acquire more customers.
Navanc currently competes with companies like Maatrum, which works on similar lines.
