India’s housing finance market is poised for massive expansion, with projections indicating it will double in the next five years. According to a report by CareEdge Ratings, the market is expected to grow from the current Rs. 33 lakh crore (US$ 378 billion) to Rs. 81 lakh crore (US$ 928 billion) by 2030. This remarkable growth will be driven by strong structural factors, increasing affordability, government initiatives, and rising loan ticket sizes.

India's Housing Loan Market Growth and Trends

Between 2021-22 and 2023-24, India's housing finance segment experienced robust growth. Banks recorded a compound annual growth rate (CAGR) of 17%, while housing finance companies (HFCs) expanded at 12% CAGR. This momentum is expected to continue as demand for home loans rises, driven by urbanisation, nuclear family trends, and rising disposable incomes.

As of March 2024, banks dominate the housing finance sector, holding a 74.5% market share. This dominance is attributed to their cost advantages, expansive reach, and portfolio acquisitions. On the other hand, HFCs maintain a steady 19% share, with their loan portfolio growing 13.2% year-on-year to Rs. 9.6 lakh crore (US$ 110.02 billion) in 2023-24.

HFCs' Role and Growth Trajectory

Despite banks' dominance, housing finance companies are growing steadily, capitalizing on niche customer segments, flexible loan structures, and competitive lending policies. According to CareEdge Ratings, HFCs are projected to witness:

• 12.7% annual growth in 2024-25
• 13.5% growth in 2025-26

This growth will primarily be driven by the retail housing loan segment, as HFCs continue to cater to borrowers who may not have easy access to traditional banking channels.

Rising Loan Ticket Sizes and Premiumisation Trend

The Indian real estate market is witnessing a shift towards high-ticket home loans, driven by rising property prices, growing demand for premium housing, and changing consumer preferences. The premiumisation trend is particularly evident in metro cities and high-income segments, where buyers are seeking larger, more luxurious homes with better amenities.

Additionally, government incentives like interest subsidies under the PMAY (Pradhan Mantri Awas Yojana), tax deductions on home loan interest, and relaxed lending norms have contributed to this rising demand.

Challenges and Opportunities Ahead

While the outlook for India's housing finance market remains positive, several challenges need to be addressed:

• Interest rate fluctuations may impact borrowing costs.
• Regulatory changes could affect lending norms.
• Risk of rising NPAs (Non-Performing Assets) in the housing loan segment.

However, technological advancements, digital lending, and improved financial literacy are creating new opportunities. With government support and economic growth, India’s housing finance market is set to be a key driver of real estate expansion.

Conclusion

India’s housing finance market is on a strong growth trajectory, projected to reach Rs. 81 lakh crore (US$ 928 billion) by 2030. Banks and HFCs will continue to expand their portfolios, catering to an evolving consumer base. The sector’s robust growth, coupled with rising loan ticket sizes and the premiumisation trend, makes it a crucial pillar of India's economic development and real estate boom.