EQT’s Rs 1,750cr buyout of IndoStar Home Finance shakes up India’s housing market

Global private equity firm EQT has made headlines with its acquisition of IndoStar Home Finance Private Limited for INR 1,750 crore (£174 million). This transaction not only highlights EQT’s increasing focus on India’s fast-growing housing finance sector but also signals the potential for a transformative shift in how affordable housing is funded in the country. IndoStar Home Finance, a subsidiary of IndoStar Capital Finance Limited, is a leading player in providing home loans to low-income borrowers, especially in smaller cities.

A powerful move into India’s housing market

With an additional investment of INR 5 billion (£50 million) from EQT, IndoStar Home Finance is set to embark on its next phase of growth, expanding its footprint in India and focusing on digital transformation. The acquisition comes at a critical time, as the Indian housing market is projected to experience significant growth over the coming decade. The country’s housing finance market is estimated to be valued at INR 30 trillion (£300 billion), and with rising urbanisation, government support, and increasing affordability, the demand for housing is skyrocketing.

EQT’s investment will not only help IndoStar Home Finance broaden its geographic reach but also leverage EQT’s expertise in digitalisation and operational improvements. By implementing advanced technology in loan processing and underwriting, EQT is positioning IndoStar to capture a larger share of the market. The acquisition will likely accelerate IndoStar’s growth trajectory, which has already seen the company achieve a compounded annual growth rate of 32% over the past three years.

EQT’s vision: a long-term investment in India

EQT’s decision to acquire IndoStar Home Finance is part of its broader strategy to capitalise on long-term growth trends in India. The country’s affordable housing finance market remains underserved, with a mortgage-to-GDP ratio of just 12.3% compared to more than 60% in developed countries such as the United States and the United Kingdom. This gap highlights the vast potential for growth, making India a prime destination for international investors.

EQT’s Managing Director for Private Capital in Asia, Hemant Sharma, explained that IndoStar Home Finance has positioned itself as a market leader, particularly in southern India. With EQT’s financial support and global expertise, Sharma believes IndoStar Home Finance is well-equipped to expand further across the country. By investing in digital capabilities, EQT plans to drive IndoStar’s transformation into a more tech-driven financial services provider.

Shreejit Menon, CEO of IndoStar Home Finance, welcomed the acquisition, noting that EQT’s resources and experience would help accelerate the company’s mission of providing affordable housing solutions across India. He emphasised that this partnership would allow IndoStar to better serve low-income families and contribute to the country’s efforts in closing the housing gap.

Expert Opinion: EQT’s strategic timing

The timing of EQT’s acquisition is strategic. With India’s government pushing for housing for all under initiatives like the Pradhan Mantri Awas Yojana (PMAY), the demand for affordable housing is expected to increase further. EQT’s focus on digitisation could be a game-changer for IndoStar Home Finance, allowing the company to offer faster and more efficient loan disbursements to a larger number of borrowers.

Experts in the financial services sector believe that EQT’s investment signals growing confidence in India’s housing finance market, which is becoming increasingly competitive with both domestic and international players vying for market share. EQT’s investment could also encourage other global firms to consider similar moves, driving further consolidation in the industry.

Implications for India’s housing finance market

India’s affordable housing sector has been ripe for disruption, with a large portion of the population still lacking access to adequate housing finance solutions. IndoStar Home Finance’s strong growth in recent years reflects the rising demand for home loans, particularly in smaller cities and towns where government housing programmes have had a significant impact.

The acquisition by EQT represents a shift in how capital is flowing into the sector, with more focus on innovation and technology. IndoStar’s plans to digitise its operations will not only improve efficiency but also make the loan process more transparent and accessible to a broader range of borrowers. As EQT works to expand IndoStar’s operations, the company could become a key player in meeting India’s housing needs.