India’s Housing Finance Market Set to Double to ₹81 Lakh Crore in 5 Years

India’s housing finance sector is poised for significant expansion, with projections indicating a doubling of its market size from ₹33 lakh crore (US$ 378 billion) to ₹81 lakh crore (US$ 928 billion) over the next 5 years. This growth is underpinned by structural demand, favourable policy incentives, and a shift towards higher-value housing loans.

Banks Lead, HFCs Maintain Steady Growth

Banks continue to dominate the housing finance market, accounting for 74.5% of total loans as of March 2024. Their competitive interest rates, extensive branch networks, and strategic portfolio acquisitions have enabled them to sustain leadership. Meanwhile, housing finance companies (HFCs) hold a stable 19% market share, with their loan portfolio growing by 13.2% in FY24 to ₹9.6 lakh crore (US$ 110.02 billion).

Impressive Growth Trajectory of Housing Loans

Between FY22 and FY24, housing loans witnessed a 17% compound annual growth rate (CAGR) in banks, while HFCs expanded at a 12% CAGR. The report forecasts that HFCs will continue to grow at 12.7% in FY25 and 13.5% in FY26, driven by increasing demand in the retail segment.

Premiumisation and Higher Loan Ticket Sizes

A growing preference for premium housing has led to a notable increase in the average loan ticket size. This shift aligns with the broader premiumisation trend in India’s real estate sector, where homebuyers are opting for larger and more expensive properties, necessitating bigger loans.

Government Support and Market Drivers

Favourable government policies, including interest rate subsidies, incentives for affordable housing, and regulatory support, have played a crucial role in boosting housing finance. Additionally, urbanisation, rising disposable incomes, and evolving homeownership aspirations continue to fuel demand for housing loans.

Conclusion

India’s housing finance market is on an upward trajectory, with sustained growth anticipated over the next 5 years. The interplay of structural demand, increasing loan values, and policy support will be key in shaping the sector’s evolution. While banks maintain a stronghold, HFCs are expected to capitalise on niche segments, ensuring a balanced expansion across the industry.

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