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Key Points

ICRA predicts strong growth in mortgage loans by NBFCs and AHFCs, driven by rising housing demand and limited unsecured lending options. Affordable housing finance is set to double, fueled by self-employed borrowers and smaller loan sizes. The sector's low loan losses and healthy returns make it an attractive market. However, AHFCs will need extensive branch networks and conservative lending policies to sustain growth.

Key Points: ICRA Projects 17-22% Growth in NBFC and AHFC Mortgage Loans

  • NBFCs and HFCs to hit Rs. 20 trillion in loans by FY2028
  • AHFCs to grow faster at 20-22% CAGR
  • Affordable housing loans to double to Rs. 2.5 trillion
  • Self-employed borrowers drive AHFC expansion with smaller ticket loans
2 min read

Mortgage loans by NBFCs, AHFCs to grow at 17-19% and 20-22% over next three years: ICRA

ICRA forecasts mortgage loans by NBFCs and AHFCs to surge 17-22% annually, reaching Rs. 20 trillion by FY2028 amid strong housing demand.

"Retail mortgage loan growth will be driven by robust demand and restricted alternative credit options – A.M. Karthik, ICRA"

New Delhi, July 30

ICRA forecasts a significant expansion in retail mortgage-backed loans provided by non-banking financial companies (NBFCs) and housing finance companies (HFCs).

The rating agency has projected a rise in loans to Rs. 20 trillion by FY2028 from approximately Rs. 13 trillion as of March 2025.

The report further reveals that, within this growth, the share of affordable housing finance companies (AHFCs) is expected to reach Rs. 2.5 trillion, up from Rs. 1.4 trillion.

According to ICRA, mortgage loans by NBFCs and AHFCs are anticipated to grow at a Compound Annual Growth Rate (CAGR) of 17-19 per cent and 20-22 per cent respectively, over the next three years.

A.M. Karthik, Senior Vice President & Co-Group Head - Financial Sector Ratings, ICRA Limited, highlighted that, "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. This sector has traditionally demonstrated strong performance, marked by low loan losses and healthy business returns."

According to the report, as of March 2025, HFCs accounted for approximately two-thirds of the total mortgage loans, with AHFCs making up 11 per cent of the overall AUM (Rs. 13 trillion).

AHFCs typically cater to a higher proportion of self-employed borrowers and offer more loans against property compared to prime HFCs. They also have a substantial share of smaller ticket loans, experiencing steep AUM growth recently, which has led to lower portfolio seasoning.

Karthik further noted that, "given their borrower characteristics, the AHFCs will have an operationally intensive business model compared to prime HFCs. This would require an extensive network of branches and staff to manage loan origination and handle collections in case of overdues. While they mitigate the credit risks arising from this with a conservative loan-to-value (LTV) and have higher business yields, sustained stability in operations and prudence in credit policies would be crucial for operating at a larger scale."

- ANI

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Reader Comments

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Priya S
As someone who recently bought a home through an AHFC, I can say these projections make sense. The process was much smoother than with traditional banks, especially for self-employed professionals like me. But they really need to improve their customer service - had to visit the branch 5 times for simple queries!
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Aman W
While growth is good, I'm concerned about the "lower portfolio seasoning" mentioned. Are we heading towards a situation where loans are being given too easily? Remember what happened with microfinance institutions a few years back. RBI should monitor this closely.
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Shreya B
The affordable housing segment is booming! This will really help Tier 2 and Tier 3 cities develop faster. My cousin in Jaipur just got a home loan approved in 48 hours from an NBFC when banks were taking weeks. More power to these financial institutions! 💪
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Karthik V
As a financial advisor, I'd caution borrowers to read the fine print carefully. Many NBFCs charge higher processing fees and prepayment penalties compared to banks. The convenience comes at a cost - do your math before signing!
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Neha E
Interesting to see how AHFCs are focusing on self-employed borrowers. Traditional banks always treat us like second-class citizens when it comes to loans. Maybe now we'll finally get fair treatment without needing to show 3 years of IT returns!

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