Will India's Affordable Housing Finance Sector AUM Reach Rs 2.5 Lakh Crore by FY28?
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Synopsis
The Indian affordable housing finance sector is on an upward trajectory, with projections indicating significant growth in AUM over the next few years. What factors are driving this remarkable expansion? Discover the insights from industry experts and how this trend may impact borrowers in the coming years.
Key Takeaways
- Retail mortgage-backed loans are expected to grow significantly by FY28.
- The share of affordable housing finance companies is projected to rise to Rs 2.5 lakh crore.
- Robust demand and limited credit options are driving growth.
- AHFCs maintain low non-performing assets rates.
- Self-construction loans constitute a substantial portion of AHFCs' portfolios.
New Delhi, July 30 (NationPress) Retail mortgage-backed loans provided by non-banking financial companies (NBFCs) and housing finance companies (HFCs) in India are anticipated to grow to Rs 20 lakh crore by FY28, increasing from Rs 13 lakh crore as recorded in March 2025. The segment of affordable housing finance companies (AHFCs) is expected to contribute Rs 2.5 lakh crore, up from Rs 1.4 lakh crore, as highlighted in a recent report.
According to the credit rating agency ICRA, mortgage loans from NBFCs and AHFCs are projected to grow at a CAGR of 17-19% and 20-22% respectively by FY28.
“In the next three years, the growth of retail mortgage loans will be fueled by strong demand along with limited access to alternative credit options, stemming from ongoing challenges in unsecured lending,” stated A.M. Karthik, Senior Vice President and Co-Group Head-Financial Sector Ratings at ICRA Limited.
This sector has consistently shown a strong performance characterized by low loan losses and healthy business returns, he noted.
Housing finance companies (HFCs) represent approximately two-thirds of all mortgage loans, with AHFCs making up 11% of the overall AUM (Rs 13 lakh crore) as of March 2025.
The report indicates that AHFCs focus more on self-employed borrowers and loans secured against property compared to larger HFCs that target prime borrower segments.
AHFCs have a significant proportion of smaller ticket loans, and their AUM growth has been notably rapid in recent times, resulting in low portfolio seasoning.
Some leading AHFCs, which account for nearly 70% of the industry AUM, have maintained non-performing assets (NPAs) at a controlled rate of 1.1-1.3% over the past three years, with average credit costs relative to average managed assets being around 0.3% during this period, as mentioned in the report.
Furthermore, the AHFCs typically have an average LTV ratio of approximately 55% and a significant portion of loans allocated for self-construction of homes (around 40% of AUM), which is expected to help maintain their credit quality.
Point of View
I emphasize the importance of tracking the evolving landscape of affordable housing finance in India. This growth signifies not only a robust demand for housing but also highlights the challenges faced by borrowers in accessing credit. NationPress is committed to delivering insights that matter to our readers as we navigate this crucial sector.
NationPress
31/07/2025
Frequently Asked Questions
What is the projected AUM for affordable housing finance companies by FY28?
The projected AUM for affordable housing finance companies (AHFCs) is expected to reach Rs 2.5 lakh crore by FY28.
How much are retail mortgage-backed loans expected to grow?
Retail mortgage-backed loans are anticipated to grow to Rs 20 lakh crore by FY28, up from Rs 13 lakh crore as of March 2025.
What is the growth rate for AHFCs?
Affordable housing finance companies are expected to grow at a CAGR of 20-22% by FY28.
What factors are driving the growth of the housing finance sector?
The growth is driven by strong demand and limited access to alternative credit options due to ongoing issues with unsecured lending.
What is the average LTV ratio for AHFCs?
The average loan-to-value (LTV) ratio for affordable housing finance companies is around 55%.
