India Housing Finance Market Size Likely to Grow at a CAGR of 24.1% By 2033

As per the current market research conducted by the CMI Team, the India Housing Finance Market size is expected to record a CAGR of 24.1% from 2024 to 2033. In 2024, the market size is projected to reach a valuation of USD 385.14 Billion. By 2033, the valuation is anticipated to reach USD 2,669.39 Billion.

India Housing Finance Market: Growth Factors and Dynamics

• Urbanization: Rapid urbanization in India is a primary growth factor driving demand for housing finance. As more people migrate to urban areas in search of better opportunities, there is a heightened need for affordable housing solutions. This trend creates a substantial market for housing finance companies, stimulating loan demand for both home purchases and construction projects.

• Government Initiatives: Government schemes like Pradhan Mantri Awas Yojana (PMAY) and Affordable Housing Fund (AHF) play a pivotal role in boosting the housing finance market. These initiatives aim to promote affordable housing for low-income groups and offer subsidies and incentives to both homebuyers and developers. Such support encourages lending institutions to extend credit to underserved segments of the population, thereby driving market growth.

• Favorable Demographics: India’s demographic dividend, characterized by a young and growing population, fuels housing demand. With a rising number of young professionals entering the workforce and starting families, there is an increased need for housing finance to facilitate homeownership. This demographic trend presents a significant opportunity for housing finance companies to cater to the evolving needs of the burgeoning middle-class segment.

• Technological Advancements: Technological innovations have revolutionized the housing finance sector, making processes more efficient and accessible. The adoption of digital platforms, mobile banking, and artificial intelligence streamlines loan application procedures, enhances customer experiences and reduces operational costs for lenders. Embracing technology enables housing finance companies to reach a wider customer base, improve service delivery, and stay competitive in a rapidly evolving market landscape.

• Low-Interest Rates: Favorable monetary policies and low interest rates set by the Reserve Bank of India (RBI) stimulate housing loan demand. Reduced borrowing costs make homeownership more affordable, prompting individuals and families to invest in real estate and avail themselves of housing finance options. Lower interest rates also incentivize refinancing activities, leading to increased business for housing finance companies and overall market expansion.

• Infrastructure Development: Infrastructure projects, such as metro rail networks, highways, and smart cities, contribute to the growth of the housing finance market. Improved connectivity and urban amenities in emerging regions attract investments in real estate development, spurring demand for housing finance. As infrastructure projects progress, the surrounding areas witness a surge in property values, creating opportunities for both developers and lenders to capitalize on the growing demand for housing loans.

India Housing Finance Market: Partnership and Acquisitions

• In June 2023, a significant development unfolded as HDFC (Housing Development Finance Corporation) and HDFC Bank merged on July 1, marking the country’s largest corporate merger. Subsequently, HDFC shares underwent delisting on July 13 and merged into HDFC Bank.

• In May 2023, LIC Housing Finance (LIC HF) announced plans to expand its branches into new regions, enhance its focus on high-yielding loans against property (LAP), and strengthen its recovery efforts. These initiatives come as LIC HF aims to solidify its position as the largest housing finance company following the merger of its larger rival, Housing Development Finance Corp, with its banking arm.

Report Scope

India Housing Finance Market: COVID-19 Analysis

The COVID-19 pandemic has significantly impacted the Indian housing finance market, with various challenges and changes emerging:

• Economic Slowdown: The pandemic-induced economic slowdown led to job losses, salary cuts, and business closures, affecting borrowers’ repayment capacity. This resulted in increased delinquencies and defaults on housing loans, posing challenges for housing finance companies.

• Moratorium and Restructuring: To mitigate the financial strain on borrowers, regulatory authorities like the Reserve Bank of India (RBI) offered loan moratoriums and restructuring options. While these measures provided temporary relief, they also increased asset quality risks for lenders.

• Digital Transformation: The pandemic accelerated the adoption of digital technologies in the housing finance sector. Lenders swiftly transitioned to online platforms for loan processing, customer service, and document verification, ensuring business continuity amidst lockdowns and social distancing measures.

• Shift in Demand: The pandemic influenced shifting preferences in housing demand, with increased interest in larger homes, suburban areas, and properties with dedicated work-from-home spaces. This trend impacted the type of loans being sought and the geographical focus of lending institutions.

• Policy Support: Government initiatives like liquidity infusion, interest rate cuts, and affordable housing schemes aimed to support the housing finance market during the pandemic. These measures aimed to boost liquidity, stimulate demand, and provide relief to both borrowers and lenders.

• Uncertainty and Adaptation: The prolonged uncertainty caused by the pandemic necessitated agility and adaptation among housing finance companies. Flexibility in loan underwriting, risk management, and product offerings became crucial to navigating the evolving market conditions and mitigating financial risks.

Overall, while the COVID-19 pandemic posed significant challenges to the Indian housing finance market, it also accelerated digital transformation, highlighted the importance of policy support, and prompted innovative strategies to adapt to the new normal. As the situation evolves, continued vigilance, resilience, and proactive measures will be essential for the sector’s recovery and long-term sustainability.

List of the prominent players in the India Housing Finance Market:

• Housing Development Finance Corporation Limited (HDFC)
• State Bank of India (SBI) Home Loans
• LIC Housing Finance Limited
• ICICI Home Finance Company Limited
• Axis Bank Home Loans
• Indiabulls Housing Finance Limited
• Dewan Housing Finance Corporation Limited (DHFL)
• PNB Housing Finance Limited
• Bajaj Housing Finance Limited
• Tata Capital Housing Finance Limited
• Can Fin Homes Limited
• Federal Bank Home Loan
• IDBI Home Finance Limited
• Repco Home Finance Limited
• GIC Housing Finance Limited
• Others

The India Housing Finance Market is segmented as follows:

By Source

• Bank
• Housing Finance Companies (HFCs)

By Interest Rate

• Fixed Rate
• Floating Rate

By Tenure

• Up to 5 Years
• 6 – 10 Years
• 11 – 24 Years
• 25 – 30 Years