Home loans set for steady 17-18% AUM growth in fiscal 27-28: Crisil
New Delhi, June 30
Home loans, which account for ~68% of assets under management are expected to grow at 17-18 per cent in fiscals 2027 and 2028. According to Crisil Ratings, the overall AUM growth of affordable housing finance companies is projected to remain steady at 19-20 per cent this fiscal and the next, aligning with the ~19 per cent growth observed last fiscal.
Loans against property (LAP), the other major business segment, are expected to grow faster at around 23 per cent over the same period, even as lenders strengthen underwriting in some borrower cohorts. The steady expansion of A-HFCs remains underpinned by macro fundamentals such as rising urbanisation, favourable demographics, and low mortgage penetration. Furthermore, housing affordability has improved in recent years as income growth outpaced property prices.
Subha Sri Narayanan, Director, Crisil Ratings, stated that changes in major urban centers will not disrupt this momentum.
"While headline data points to a moderation in launches and sales of affordable housing projects, this largely pertains to metros and is unlikely to materially affect the growth trajectory of A-HFCs for two reasons," Narayanan said.
"One, their portfolios are structurally skewed towards the Tier 2 and smaller markets, which account for over 75% of industry-wide loans below Rs 35 lakh. Two, ~45% of the lending by A-HFCs is directed towards self-construction and resale of houses, segments that are not dependent on new project launches," Narayanan added.
Demand in Tier-II and smaller markets is also getting a leg-up from India's economic growth, ongoing infrastructure buildout, and sustained government support. As per Crisil, in the LAP segment, which experienced a compound annual growth rate of about 37 per cent between fiscals 2023 and 2025, strong demand from micro, small, and medium enterprises (MSMEs) continues to drive activity.
While higher yields attract lenders looking to protect margins amidst intensifying competition, disbursements to the sub-Rs 10 lakh segments were curtailed last fiscal due to elevated borrower leverage and stress spillovers from microfinance cohorts.
Aesha Maru, Associate Director, Crisil Ratings, highlighted the strategic caution being exercised by lenders in response to these risks. "Over this and next fiscals, LAP is expected to grow at ~23%, nearly in line with the ~24-25% last fiscal. This reflects the cautious stance adopted by lenders in certain lower-ticket borrower segments to manage the potential stress there," Maru said.
"In addition, heightened global uncertainties and uptick in inflation stemming from the conflict in West Asia, and their potential impact on borrower cash flows, could further temper risk appetite in the near term, leading to tighter credit filters and selective disbursements," Maru added.
Nevertheless, sustained demand for both affordable housing and MSME financing, coupled with prudent underwriting and stronger risk controls, is expected to help affordable housing finance companies maintain healthy portfolio growth and controlled asset quality metrics.
Crisil warned that moving forward, any sustained uptick in interest rates and other macroeconomic headwinds will remain key factors to watch.
— ANI
Reader Comments
Sounds promising on paper, but what about the common man? Even with "improved affordability," property prices in my city (a Tier 2 town) have shot up 30% in two years. Interest rates are still high. I hope lenders don't get too aggressive and push risky loans again. The microfinance stress mentioned is a real concern.
Good analysis by Crisil. The 45% going to self-construction and resale is key – that's how most people in smaller towns build their homes. Not everyone buys a flat from a builder. LAP growing at 23% is interesting too, MSMEs really drive that. But caution is needed, especially with inflation and global uncertainties. 👌
Interesting to see the Indian housing finance story from an outsider's view. The urbanization and demographic dividend is real. But I wonder how long this low mortgage penetration can sustain growth – at some point, saturation will hit even smaller markets. The caution on interest rates is wise.
Self-construction segment is the backbone of affordable housing in India. Happy to see it getting its due recognition. However, the caution on lower-ticket segments is valid – many families stretch too much. Hope the "tighter credit filters" don't shut out genuinely deserving borrowers. Balance is key. 🙏
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