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India's housing finance market, currently valued at INR 33 trillion, is set to grow at a 15-16% CAGR, reaching INR 77-81 trillion by FY30. This growth is fueled by record home sales, favorable government policies, and rising demand for luxury properties, which accounted for 50% of sales in 2024. Banks dominate the market with a 74.5% share, while Housing Finance Companies (HFCs) maintain 19%. Improved asset quality and declining GNPAs (2.2%) signal stability. With 3.03 lakh units sold in 2024, India's residential real estate market is on track to reach $40.2 trillion by 2025.
India's housing finance market, currently valued at approximately INR 33 trillion, is projected to expand at a compound annual growth rate (CAGR) of 15-16% between fiscal years 2024-25 and 2029-30, potentially reaching a valuation between INR 77 trillion and INR 81 trillion. This anticipated growth is underpinned by robust structural factors and favorable government incentives, positioning housing finance as an attractive asset class for lenders. Advertisement
The residential property market, a pivotal driver of housing finance, has demonstrated significant growth. In the first half of 2024, sales across eight major Indian markets reached 173,241 units, marking a 10.6% year-on-year increase and achieving an 11-year high in half-yearly sales. Notably, luxury apartments priced above INR 1 crore accounted for over 50% of sales in 2024, highlighting a shift towards high-end properties.
Between 2021 and 2024, banks, including the effects of the HDFC Ltd merger, experienced a CAGR of 17% in the housing loan sector, while Housing Finance Companies (HFCs) grew at 12%. As of March 31, 2024, banks held a 74.5% share of the housing loan market, aided by advantages such as lower cost of funds and extensive reach. HFCs maintained a stable market share of 19%, with their loan portfolios expanding by 13.2% to INR 9.6 trillion in the 2023-24 fiscal year.
Looking ahead, CareEdge Ratings forecasts year-on-year growth rates of 12.7% for 2024-25 and 13.5% for 2025-26 in the housing finance sector, driven by robust equity inflows and strengthened capital reserves. The retail segment remains the primary growth driver for HFCs, although cautious growth is observed in the wholesale segment.
Correspondingly, the asset quality of HFCs has improved, with gross non-performing assets (GNPA) decreasing to 2.2% as of March 31, 2024, down from a peak of 4.3% as of March 31, 2022. This trend reflects the sector's growing stability amidst rapid expansion.
These developments align with broader market trends, such as the record high of 3.03 lakh units sold in 2024, marking an 11% increase from the previous year. Additionally, the residential real estate market in India is projected to reach a value of approximately $40.2 trillion by 2025, with an annual growth rate of 2.47% from 2025 to 2029.
In summary, the housing finance sector in India is experiencing significant growth, driven by increasing sales, a shift towards luxury properties, and improving asset quality. These trends are expected to continue, supported by favorable economic conditions and government initiatives.
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