DHFL creates in-house software to fulfil housing dreams

Though IT has pervaded every aspect of the housing industry, there are certain segments where there is still a lack of standard solutions. It is only through individual initiatives that this gap can be bridged. And this is exactly what Dewan Housing Finance is doing, says Stanley Glancy

With the IT system in place, DFHL expects to make Rs 400 crore in the current financial year, says kapil wadhawan

One segment that has been witnessing rampant growth in the financial services space is housing finance. The various concessions provided by the government, especially in the recent budget, has provided this segment with the necessary propulsion. But growth has also brought along its own set of problems. Like most other segments in the financial industry, this sector too has to deal with an increasing amount of data, which calls for information technology deployment.

But unlike banking and insurance sectors, which have extensive IT implementations, the housing finance market is yet to be introduced to the benefits of IT. This can be seen from the lack of any clear standards in this space when it comes to the IT usage. Most companies including HDFC and LIC Housing—the two giants in this space—have been developing in-house software to tackle this issue. But Mumbai-based Dewan Housing Finance (DHFL) has decided to go one step further and develop a state-of-the-art product, which will be the benchmark for the rest of the industry

The company
DHFL’s IT programme started in the year 2000. The company appointed Pricewaterhouse Coopers (PwC) to reengineer its business processes. The objective behind the exercise was to restructure the processes using technology. Says Kapil Wadhawan, DHFL’s managing director, “For housing finance there was no readymade software. With the business growing rapidly it was imperative to put a system in place to streamline the process. PwC was asked to look at internal best practices to increase our efficiencies. PwC’s process reengineering study came up with recommendations for smoothening operations.”
DHFL has over a decade of experience in the field of housing finance. Begun during the days when housing finance had still not gained the transparency it has today, according to Wadhawan, the company has always been on the lookout for newer methods of improving efficiency and reducing the transaction processing time.

This was one reason for the company’s early venture into IT. DHFL recorded a turnover of Rs 203 crore last year. But with the IT system completely in place the company expects to reach at least the Rs 400 crore mark in the current financial year. DHFL also took over Vysya Bank Housing Finance (VBHF) a few months back. This should, according to Wadhawan, show a combined turnover of Rs 1,300 crore in fiscal 2004.

The need
DHFL had a FoxPro system in place, which had its limitations. Most of the applications in use had been developed in-house. The legacy application was not only slow but was also not robust enough to handle the growing business. According to Wadhawan, the software could handle transactions to only a certain point. Once the load on the system increased, the software tended to crash.

The hardware too, was not strong enough to handle the growing volumes. And most importantly, the system was not user-friendly. Says Wadhawan, “The back-end is the least of the concerns of people conducting the daily transactions. Their main problem was the interface, which was tough to handle.”

DHFL realised that this was slowing down the entire process of transaction, which had an adverse affect on the business. This made it necessary to not only change the software but also the hardware.

Another reason for appointing PwC for reengineering the business process was the Internet. Adds Wadhawan, “The Internet had emerged as a front runner in the past 4-5 years. This made it imperative for us to use Internet processes to gain a competitive advantage.”

The company was spread out geographically with branches in more than 42 locations. Also, the company has camp locations and offices across the country. This called for connectivity at least between the main branches. The objective was to bring about improvement in service and efficiency.

Explains Wadhawan, “In the case of housing finance we have to finish a transaction in minutes instead of days. Today, the customer has options. Only institutions proving quality and on-the- spot service can survive in this era of cut-throat competition.”

DHFL is also particular about the credit quality of its borrowers especially those related to timely payment and loan defaults. To maintain credit quality it was necessary to have a centralised as well as a decentralised working environment.

The system
PwC suggested the formulation of four key modules dealing with DHFL’s core business processes. These were: housing loans, fixed deposits, accounting and securitisation. The applications would be used for all lines of business processes, including fixed deposits and accounting. PwC also recommended the creation of a centralised architecture. The DHFL management, after due evaluation, felt that the best technology available was Lotus Notes. The company also decided on IBM AS400 for hardware.

The company CRM also revolves around Lotus Notes. Currently, there are more than 35 locations using it. As connectivity was a major issue, DHFL appointed Tata Teleservices for providing this facility. The company is also looking at other vendors for improving networking. The company is using VPNs, leased lines and dial-up for networking. Though telecommunication has been a problem, Wadhawan feels that the problem is slowly fading away.

The implementation
DHFL appointed a well-known private firm as the IT solution provider, to implement plans of connecting all its branches across the country. According to Wadhawan, the firm was selected, as they had a proven track record of successful completion of projects, which involved integration of diverse skills. The project was expected to enable the company in reducing customer response time and also sanction loans expeditiously.

The firm was also asked to implement online solutions, which would enable customers to know their loan application status and ensure speedy processing and approval of loans. But DHFL faced a lot of challenges with the customisation of the software.

Though the business requirements were clearly discussed, the firm found it difficult to complete the implementation. This was basically because the software required lots of customisation, which had never been done before. The firm had finished customising more than 70 percent of the software. But the new software was very slow, which was adversely affecting the company.

Bandwidth was also proving to be a problem. The low speed was effecting the overall architecture and service levels. This was when DHFL decided to implement the software in-house. The company used the existing software as a base and also hired some external people with in-depth understanding of Lotus Notes software.

Benefits
According to Wadhawan, implementation of the software is going to be critical for DHFL, as the company is expecting a reduction in costs by at least 15-20 percent. Role responsibilities and functions are also expected to change.

The company is looking at a complete integration of all applications as they expect this to facilitate the management in taking quick decisions. The system is also expected to handle the growing volume of business and enable quicker communication. This, Wadhawa feels, will drive the decision-making process.

Online
Once the online system is in place, an applicant will have to only fill-in a form, which will be processed online, and the sanction details will be conveyed to the applicant in less than 15 minutes. The service will soon be made available on the company’s website. But DHFL is not looking at the Internet as a mode of completing transactions. Opines Wadhawa, “Internationally there are credit bureaus and lenders who share information regarding the borrower. But we don’t have a similar system in place.

Also, there are no land records available for verification of credentials. In the absence of these factors it is not possible to complete a loan transaction online. The Internet is a good way of collecting information and initiating the process. But the actual work has to be done physically. Also, insurance, property services are all data oriented so they won’t require complete online facilitation.”

Future
The company plans to put up touch screen kiosks across the country to facilitate information-sharing regarding products. In fact, kiosks are already in place in two places.

DHFL has tied-up with Birla Sun Life for offering their insurance policies to clients. With the advent of the private sector, the company is looking at the insurance sector because it offers synergies with the existing line of home loan products. The company is currently looking at vendors who can offer plans for selling insurance and housing finance.

Says Wadhawan, “we will keep our eyes open to know what is happening in the market. And once we deploy this software we will look at sharing this information with others at our own terms.”