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					</table>Small businesses are open to adopting rooftop solar if loan repayment is not an additional burden and is equal to their savings on electricity bills. Entities in the commercial and industrial (C&amp;I) segment are increasingly moving towards renewable energy options, including rooftop solar, given the immense benefits they bring in terms of cost savings and reputation as sustainable companies.
Vikas Agarwal, the co-founder of non-banking financial company <a href="https://creditfair.in/" target="_blank" rel="noopener">Credit Fair</a>, said in an interview with Mercom India that there is an uptick in rooftop installations in the residential segment after the Union government <a href="https://mercomindia.com/modi-launches-national-portal-rooftop-solar/" target="_blank" rel="noopener">launched</a> a national portal for rooftop solar to submit applications.  The government has also<a href="https://mercomindia.com/residential-rooftop-solar-subsidies-to-be-directly-transferred-to-the-consumers/" target="_blank" rel="noopener"> started</a> direct transfer of subsidies to the consumers’ bank accounts.
Can you briefly introduce Credit Fair to our audience, specifically your green loan offerings?
Credit Fair started operations in 2018 as a non-banking financial company regulated by RBI. One of the four categories of businesses we finance is solar rooftop installation which makes up roughly 20% of our loan book.
What loan products do you offer for residential rooftop solar, and what are some of the criteria to qualify for these loans?
We finance three categories of rooftop solar installation: residential (standalone units), housing societies, and MSMEs. The residential rooftop systems range between 3-5 kW. The systems for MSMEs could range from 20-50 kW. We are currently processing 500 applications in a month from all over India.
What are the other concerns that keep individual households away from adopting solar rooftop solar?
With the improvement in the timely disbursement of subsidies from the central government, individual households have started adopting rooftop solar solutions.
Depending on the project, the subsidy covers about 20-25% of the cost. Earlier, the subsidy would come to the installer, but now the central government has dedicated a web portal for such applications. Consumers can fill in the details and receive the subsidy amount directly into their bank account within 40-50 days of commissioning.
What is the average cost of constructing a residential system at 3 kW? What loan amount can Credit Fair release for such a system? Will you finance 100% of the project value?
Depending on the quality of engineering, procurement, and construction (EPC) work, a 3 kW system can cost up to ₹225,000 ($2,718). Credit Fair provides about 80% of the total cost as loans, while the remaining 20% is a down payment from the customers. We disburse the loan, and then the installation work starts. Usually, we pay the installers directly on behalf of the consumer.
Do you provide loans directly to households or through partnerships with rooftop installers? How does a rooftop installer become a partner of Credit Fair?
We have recently onboarded Tata power as the installer. They have 400 dealers all over India. So, all these dealers will now be on board with us to do this business. We are also working with Solar Square.
Is the disbursal of subsidies from state governments a challenge for residential rooftop solar?
There is barely any subsidy from state governments, but the central government system of timely disbursal of subsidies has improved with the advent of the new central portal for rooftop solar installations.
What is the profile of C&amp;I consumers to whom you provide loans? What is the average size of C&amp;I projects that you finance?
Currently, we cater to small businesses that typically require up to 50 kW systems. We have clients that include flour mills and other metalwork firms.
What are the typical concerns that deter small C&amp;I consumers from adopting solar?
We have found that medium enterprises with turnover above ₹500 million (~$6 million) usually know the benefits of bringing solar into their energy mix. But smaller units are reluctant about the upfront investment. However, installers and financial companies like us have a substantial role in convincing these businesses to adopt solar.
 Do you customize EMIs so that they can be covered within the energy savings for a C&amp;I entity?
We structure our EMIs to ensure that it’s equal to the amount of savings accrued to the business, and the tenure is typically 3-5 years. This model ensures that there is no additional interest payment burden for the firms, making it easier for them to adopt solar.
The loan ticket size is typically ₹1.5-2 million (~$18,125-$24,166) and can go up to ₹5 million (~$60,388).
During the underwriting process, we ask for data regarding electricity bills for the past three months and cash flow status. Based on this, we calculate the power saving and design our EMIs so that the savings are used to pay off the loan.
Do you have loans for electric vehicles?
We do have loans for electric vehicles, but it’s not a big portfolio currently.
What are your plans for the next five years? Do you see the green loan business growing?
We are aggressively focusing on the green loan business and target 40% of the total loan book to be green financing in the next two years.
It translates to assets under management (AUM) of ₹10 billion (~$121 million) with ₹4 billion (~$48.4 million) of green loans by FY 25.

MSMEs Adopt Solar Readily If Savings on Power Bills Cover EMI Cost: Interview

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					</table>In the fourth article of our series covering all you need to know about rooftop solar systems, we focus on ways to finance your residential rooftop system. This write-up will help you understand the different ways to finance your rooftop installations through banks or financial institutions, the processes and the documentation involved, rates of interest applicable, and the collateral.
Check out the <a href="https://mercomindia.com/want-install-rooftop-solar-system-home/" target="_blank" rel="noopener noreferrer">first</a> and <a href="https://mercomindia.com/money-rooftop-solar-systems-save/" target="_blank" rel="noopener noreferrer">second</a> of the series.
The System Cost
The <a href="https://mercomindia.com/cost-install-1-kw-solar-residential-rooftop/" target="_blank" rel="noopener noreferrer">third</a> article in the series had shed light on the cost of the rooftop solar system, which depends on the price of the modules and inverters used.
The cost of a 1 kW rooftop solar system ranges from ₹45,000 (~$612) to ₹85,000 (~$1,156), excluding the batteries&#8217; cost. A 5 kW system could cost in the range of ₹225,000 (~$3,061) to ₹425,000 (~$5,782), excluding GST.
Financing Through Banks and NBFCs
The first line of financing is banks, which offer loans under top-up plans such as home loans and renovation loans. For this scenario, we are considering that the capital is invested by the consumers who own the rooftop solar systems on their homes.
Some banks specifically finance rooftop installations, albeit rates of interest vary significantly from one bank to another, starting anywhere from 10% to 18%, depending on the borrower&#8217;s source of income and risk profile. The maximum tenure for the loan again varies from bank to bank ranging from 1-5 years up to 20 years.
Even the securitization of the loan varies from one lender to another. Canara Bank will mortgage the residential property and hypothecate the solar equipment. Meanwhile, YES Bank, which has a tie-up with Luminous, can issue an unsecured loan.
<a href="https://mercomindia.com/wp-content/uploads/2020/12/rooftop-solar-loans-by-bank_ver.jpg"><img decoding="async" class="aligncenter size-full wp-image-23015" src="https://mercomindia.com/wp-content/uploads/2020/12/rooftop-solar-loans-by-bank_ver.jpg" alt="rooftop solar loans by bank_ver" width="100%" height="100%" srcset="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2020/12/rooftop-solar-loans-by-bank_ver.jpg 1685w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2020/12/rooftop-solar-loans-by-bank_ver-300x244.jpg 300w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2020/12/rooftop-solar-loans-by-bank_ver-768x624.jpg 768w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2020/12/rooftop-solar-loans-by-bank_ver-1536x1249.jpg 1536w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2020/12/rooftop-solar-loans-by-bank_ver-650x528.jpg 650w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2020/12/rooftop-solar-loans-by-bank_ver-624x507.jpg 624w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2020/12/rooftop-solar-loans-by-bank_ver-600x488.jpg 600w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2020/12/rooftop-solar-loans-by-bank_ver-1024x833.jpg 1024w" sizes="(max-width: 1685px) 100vw, 1685px" /></a>
Mercom spoke to Priyanka Mohan, Director of Kor Energy, who said, &#8220;There are several banks and non-banking financial institutions (NBFCs) where we line up our clients. However, we prefer that our customer&#8217;s existing banks take up the funding since they already have a rapport. We then send the detailed project report to the bank and ask our client to source the loan from them. If there are issues with the banks, we can always approach NBFCs and other institutions that offer solar funding.&#8221;
NBFCs finance solar installations on residential properties. However, unlike banks, the interest rates are quite steep, ranging from 13% to 24%, though most don&#8217;t demand collateral.
<a href="https://mercomindia.com/wp-content/uploads/2020/12/Rooftop-by-NBFC-banking-chart_ver.jpg"><img decoding="async" class="aligncenter size-full wp-image-23014" src="https://mercomindia.com/wp-content/uploads/2020/12/Rooftop-by-NBFC-banking-chart_ver.jpg" alt="Rooftop by NBFC banking chart_ver" width="100%" height="100%" srcset="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2020/12/Rooftop-by-NBFC-banking-chart_ver.jpg 1849w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2020/12/Rooftop-by-NBFC-banking-chart_ver-300x271.jpg 300w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2020/12/Rooftop-by-NBFC-banking-chart_ver-768x693.jpg 768w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2020/12/Rooftop-by-NBFC-banking-chart_ver-1536x1386.jpg 1536w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2020/12/Rooftop-by-NBFC-banking-chart_ver-650x586.jpg 650w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2020/12/Rooftop-by-NBFC-banking-chart_ver-624x563.jpg 624w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2020/12/Rooftop-by-NBFC-banking-chart_ver-600x541.jpg 600w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2020/12/Rooftop-by-NBFC-banking-chart_ver-1024x924.jpg 1024w" sizes="(max-width: 1849px) 100vw, 1849px" /></a>
Retailer Option
Meanwhile, companies like Luminous, which has tie-ups with YES Bank and IDBI, also finance their end customers through their dealer networks.
The national sales head, solar, and assistant vice president at Luminous India, Sanjay KVS, spoke to Mercom about this, &#8220;Around 98% of our business comes from our distribution network, and we empower our retailer so that they can get us good business. Typically, our dealers are battery and inverter shops. Luminous makes a deal with the larger financial institutions and shares the offers with them. The commercial dues and charges are covered by Luminous so that the customer and the retailer do not have to pay them.&#8221;
Customers can also pay Equated Monthly Installment (EMI) through credit cards as they do with other consumer durables. These options are only meant for the components, where the customer comes to the counter, buys the battery/inverter/panel, swipes his credit card, and then pays the EMI later. Sanjay added that Luminous has an agreement with Pine Labs &#8211; an Indian merchant platform that provides financing and last-mile retail transaction technology.
As for customers who want full-fledged installations, Sanjay said, &#8220;We tie-up with financial institutions such as IDBI and YES Bank, we don&#8217;t offer direct financing. The institutions will assess the creditworthiness, the project size, and, based on that, the loan is approved and disbursed.&#8221;
Installers Vouch for Alternative Means of Funding
When Mercom spoke with various residential rooftop installers, their responses showed clear disdain for bank finance. According to some installers, it makes more sense to opt for a consumer durable loan or a personal loan instead of going for a home loan top-up or NBFC financing.
Sushil Sarawagi, Director of Kor Energy, said, &#8220;There are certain specialized products which the banks have floated for residential rooftop solar. The RBI has instructed banks and NBFCs to include rooftop installations under home loans. But the issue is that under home loans or home improvement loans, the customer has to mortgage their property for ₹500,000-₹1 million (~$6,746-~$13,493). This becomes a bone of contention for the customers.&#8221;
He further added, &#8220;Although we refer our clients to banks, they are not keen on bank financing as they find the whole documentation and mortgage process cumbersome. Our customers are seeking easy finance options similar to consumer durable loans. Through such options, they secure finance for a year or so without significant documentation or any mortgage.&#8221;
Arshi Chadha, COO of Sunson Energy, raised similar sentiments and stated that it&#8217;s more feasible to finance residential properties in a cluster (such as housing societies) instead of funding one residential property. It ensures that payments keep flowing.
&#8220;We are experimenting with a new financing model on a pilot basis where we are approaching clients whom we know will stay with us in the long-term, and we take 50% of the payment from them upfront during the installation phase. The remaining 50% would be under the EMI option,&#8221; Arshi told Mercom.
Arshi added that although Sunson works on securing loans, the deals are quite expensive. &#8220;The rates are high as 16% whether our clients approach banks or NBFCs, and it makes more sense to go for personal loans. I have gone to every bank&#8217;s head office, from Bank of Baroda to SBI. Banks like SBI will only finance rooftop installations as a top-up loan. One of my clients owns a 50-year-old home worth ₹100 million (~$1.3 million); why would they give it as collateral for a ₹1million (~$13,493) loan. The ideal way to finance rooftop installations is through loans with zero collateral.&#8221;
In summation, there are plenty of choices for the end consumer to finance their rooftop solar installation &#8211; from conventional mortgage loans to &#8216;no security&#8217; personal loans and even over the counter credit card payment options. It boils down to being aware of all the available options to make the right financing choice.
Contact us by filling out this <a href="https://mercomindia.com/lead-generation-form/" target="_blank" rel="noopener noreferrer">form</a> if you are planning to install a rooftop solar system for your home.

Residential Rooftop Solar Loans: All You Need to Know

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