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Key Points

India's affordable housing finance sector is poised for rapid expansion with ICRA projecting AUM to reach Rs 2.5 lakh crore by FY28. The sector benefits from strong demand and limited unsecured lending options, maintaining healthy NPAs below 1.3%. AHFCs cater primarily to self-employed borrowers with smaller ticket loans and self-construction financing. With average LTV at 55% and steady credit costs, the sector demonstrates resilient growth fundamentals.

Key Points: India Affordable Housing Finance AUM to Hit Rs 2.5 Lakh Crore by FY28

  • Affordable housing finance AUM to grow at 20-22% CAGR till FY28
  • AHFCs hold 11% share of India's Rs 13 lakh crore mortgage market
  • Sector maintains low NPAs of 1.1-1.3% over 3 years
  • Self-employed borrowers dominate 40% of AHFC loan portfolios
2 min read

India's affordable housing finance sector AUM to reach Rs 2.5 lakh crore by FY28

ICRA projects 20-22% growth for affordable housing finance sector, reaching Rs 2.5 lakh crore AUM by FY28 amid strong demand.

India's affordable housing finance sector AUM to reach Rs 2.5 lakh crore by FY28
"Retail mortgage loan growth will be driven by robust demand and restricted availability of alternative credit options - A.M. Karthik, ICRA"

New Delhi, July 30

Retail mortgage-backed loans offered by non-banking financial companies (NBFCs) and housing finance companies (HFCs) in the country are projected to expand to Rs 20 lakh crore by FY28, from Rs 13 lakh crore as of March 2025, to which the share of affordable housing finance companies (AHFCs) would rise to Rs 2.5 lakh crore from Rs 1.4 lakh crore, a report said on Wednesday.

Mortgage loans by the NBFCs and the AHFCs are expected to expand at a CAGR of 17-19 per cent and 20-22 per cent, respectively, by FY28, credit rating agency ICRA said in its report.

“Over the next three years, retail mortgage loan growth will be driven by robust demand and the restricted availability of alternative credit options due to ongoing issues with unsecured lending," said A.M. Karthik, Senior Vice President and Co-Group Head-Financial Sector Ratings, ICRA Limited.

This sector has traditionally demonstrated strong performance, marked by low loan losses and healthy business returns, he added.

The housing finance companies (HFCs) accounted for about two-thirds of these overall mortgage loans, and within this, AHFCs constituted 11 per cent of the overall AUM (Rs 13 lakh crore) as of March 2025.

According to the report, the AHFCs have a higher share of self-employed borrowers and loans against property in their portfolio compared to other large HFCs focused on the prime borrower segments (prime HFCs).

The AHFCs have a sizeable share of smaller ticket loans, and their AUM growth has been quite steep in the recent past, resulting in low portfolio seasoning.

Some leading AHFCs, accounting for close to 70 per cent of the AHFC industry AUM, non-performing assets (NPAs) have remained under control at 1.1-1.3 per cent over the last three years, with average credit cost as a proportion of average managed assets being around 0.3 per cent over this period, the report stated.

As per the report, the AHFCs have an average LTV of around 55 per cent and have a sizeable share of loans extended for self-construction of homes ( around 40 per cent of AUM), which is expected to keep their credit quality under control.

- IANS

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Reader Comments

S
Sarah B
While the growth projections look impressive, I'm concerned about the repayment capacity of self-employed borrowers. The economic uncertainties post-pandemic still linger. NBFCs should maintain strict due diligence.
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Ananya R
As someone who recently got an affordable home loan, I can vouch for how life-changing this is! The process was smoother than traditional banks. More power to AHFCs for serving the underserved sections 🙌
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Vikram M
The low NPA numbers are impressive, but I wonder if they'll hold when the portfolio matures. Many first-time home buyers don't fully understand the long-term commitment. Financial literacy programs should accompany these loans.
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Priya S
Good initiative but implementation is key. In my hometown, many affordable housing projects get delayed for years. The finance sector growth must be matched by timely delivery of homes. Otherwise it's just debt without roofs!
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Karthik V
The 55% LTV ratio shows prudent lending practices. This conservative approach will protect both lenders and borrowers during market downturns. Hope this discipline continues as competition increases in the sector.

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