India's housing finance market, currently valued at Rs. 33,00,000 crore (US$ 379.7 billion), is poised for significant growth. According to CareEdge Ratings, the sector is projected to grow at a compound annual growth rate (CAGR) of 15-16%, reaching Rs. 77,00,000-81,00,000 crore (US$ 886.1-932.3 billion) by 2029-30. The remarkable growth is attributed to a combination of strong structural fundamentals, government incentives, and an increasing demand for housing finance.

The residential property market in India has witnessed substantial growth in recent years, expanding by 74% since 2019, and now stands at 4.6 lakh units in 2024. This surge in property development reflects high buyer confidence and underscores the resilience of the Indian housing market. The growing demand for housing, combined with favorable government policies and a growing middle class, makes housing finance a highly attractive sector for lenders.

Banks continue to dominate the housing loan segment, accounting for a substantial 74.5% of the market share as of March 2024. Housing Finance Companies (HFCs), though smaller in comparison, have seen a steady rise in their market share, holding 19%. The HFC sector grew at a 12% CAGR in recent years, demonstrating its ability to tap into the growing demand for residential properties. The loan portfolios of these companies rose by 13.2% in FY24, totaling Rs. 9,60,000 crore (US$ 110.5 billion), in line with CareEdge's forecasted growth.

The outlook for HFCs remains positive, with projections for 12.7% and 13.5% year-on-year growth in FY25 and FY26. This growth is expected to be supported by strong equity inflows, growing capital reserves, and the continued expansion of the retail housing segment. While the wholesale lending segment remains cautious, the retail segment remains the primary growth driver for HFCs.

In addition to strong growth in loan portfolios, HFCs have also made significant strides in improving their asset quality. The gross non-performing assets (GNPA) ratio has fallen to 2.2% by March 2024, down from a peak of 4.3% in March 2022. This improvement in asset quality is indicative of prudent lending practices and better risk management strategies being adopted by these companies.

Looking ahead, the housing finance market in India is expected to continue its growth trajectory, bolstered by a combination of favorable government policies, strong investor interest, and growing demand for residential properties. The sector’s expansion is also supported by the robust performance of banks and HFCs, which are well-positioned to benefit from the ongoing growth in the housing market.

Overall, the housing finance market in India is set to undergo substantial growth over the next decade, providing significant opportunities for lenders, borrowers, and investors alike. As the sector continues to evolve, it will remain one of the key drivers of the country’s economic development and financial inclusion efforts.

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