The housing finance market in India is projected to grow at a remarkable CAGR of 15-16% from 2024-25 to 2029-30, according to CareEdge Ratings. This growth is primarily driven by favorable government incentives and robust structural elements that make housing finance an appealing asset class for lenders. The residential properties market has also shown significant growth, indicating sustained buyer confidence.
- The housing finance market is expected to reach Rs 77-81 trillion by 2029-30.
- Housing Finance Companies (HFCs) are projected to grow their loan portfolios by 12-14% in the coming years.
Robust Growth Projections for Housing Finance
According to CareEdge Ratings, the current valuation of the housing finance market stands at approximately Rs 33 trillion, and it is anticipated to expand significantly to reach Rs 77-81 trillion by the end of the 2029-30 fiscal year. This impressive growth trajectory reflects a CAGR of 15-16% during the period from 2024-25 to 2029-30. The underlying factors contributing to this growth include robust structural elements within the market and favorable government incentives, which are expected to enhance the attractiveness of housing finance as an asset class for lenders. Furthermore, the residential properties market has demonstrated buoyancy, showcasing a remarkable 74% growth since 2019, with a significant increase in unit sales to 4.6 lakh units in 2024. This positive trend indicates that buyer confidence remains strong, even as sales performance normalizes.
Performance of Banks and Housing Finance Companies
Between 2021 and 2024, the housing loan sector has seen substantial growth among banks and Housing Finance Companies (HFCs). Banks have reported a compounded annual growth rate (CAGR) of 17% in the housing loan market, while HFCs have experienced a slightly slower growth rate of 12%. As of March 31, 2024, banks held a dominant market share of 74.5% in housing loans, aided by cost advantages and extensive reach. Despite the competitive landscape, both banks and HFCs are expected to continue growing, driven by the strong potential of the housing finance market. HFCs maintained a stable market share of about 19% as of the same date, and CareEdge Ratings anticipates this trend to persist. In the fiscal year 2023-24, HFCs’ loan portfolios experienced a commendable growth of 13.2%, aligning with projections of 12-14% growth for the upcoming years. The retail segment remains the cornerstone of growth for HFCs, although a more cautious approach is observed in the wholesale segment. Notably, the asset quality of HFCs has improved significantly, with gross non-performing assets (GNPA) dropping to 2.2% as of March 31, 2024, from a peak of 4.3% in March 2022.
Future Outlook for the Housing Finance Market
The future of the housing finance market appears promising, with CareEdge Ratings predicting continued growth fueled by strong equity inflows and robust capital reserves. The anticipated year-on-year growth rates for 2024-25 and 2025-26 are projected at 12.7% and 13.5%, respectively. The ongoing positive trends in the residential properties market, combined with favorable government policies, are likely to bolster buyer confidence further. As the market expands, lenders are expected to enhance their offerings, catering to the evolving needs of consumers. This sustained growth in housing finance will not only benefit lenders but also stimulate the broader real estate sector, contributing positively to the overall economy. The focus on improving asset quality and reducing non-performing assets will also play a crucial role in maintaining the health of the housing finance sector.
