India's Housing Finance Market Set to Reach INR 81 Lakh Crore by 2029

Structural Strength Meets Government Support

India's housing finance market is on an extraordinary growth trajectory, with potential to more than double from its current value of ₹33 lakh crore to a staggering ₹81 lakh crore within the next five years, according to a comprehensive report by CareEdge Ratings. This remarkable expansion will be fueled by robust structural elements and strategic government incentives that make housing finance increasingly attractive to lenders.

Residential Real Estate: The Bedrock of Growth

The residential properties market remains exceptionally buoyant, serving as the primary engine for the housing finance industry. The sector has witnessed an impressive absolute growth of 74% since 2019, with unit sales climbing to 460,000 in 2024.

Banks vs. HFCs: The Competitive Landscape

Between FY21 and FY24, banks have dominated the housing loan space, growing at a compound annual rate of 17%, while Housing Finance Companies (HFCs) maintained a respectable growth rate of 12%. Banks currently command a 74.5% market share (as of March 31, 2024), leveraging their cost of funds advantage, extensive reach, portfolio buyouts, and co-lending arrangements. Meanwhile, HFCs have maintained a stable market share of 19%.

HFCs: Steady Growth and Evolving Portfolio Mix

The loan portfolio of HFCs grew by 13.2% to ₹9.6 lakh crore in FY24, aligning perfectly with CareEdge Rating's growth estimate of 12-14%. Looking ahead, the ratings firm projects year-on-year growth of 12.7% in FY25 and 13.5% in FY26, supported by robust equity inflows and strong capital reserves. HFCs primarily operate in the smaller ticket segment (less than ₹30 lakh), which represented 53% of their total AUM as of March 2024.

However, there's a noticeable trend toward higher ticket sizes, with growing proportion in the ₹30-50 lakh range.

The Premiumization Trend

The market is witnessing a gradual shift toward premium properties, though interestingly, HFC ticket sizes aren't growing at the same pace as residential property launches. This suggests that demand for higher-ticket loans is being fulfilled by banks or through increased self-funding by buyers.

Key Facts and Figures:

• Current Market Value: ₹33 lakh crore

• Projected Market Value (2029): ₹81 lakh crore

• Residential Units Growth: 74% increase since 2019 (460,000 units in 2024)

• Banks' CAGR (FY21-FY24): 17%

• HFCs' CAGR (FY21-FY24): 12%

• Banks' Market Share: 74.5% (as of March 31, 2024)

• HFCs' Market Share: 19% (as of March 31, 2024)

• HFC Loan Portfolio Growth (FY24): 13.2% (to ₹9.6 lakh crore)

• Projected HFC Growth: 12.7% (FY25), 13.5% (FY26)

• HFC Small Ticket Loans (<₹30 lakh): 53% of total AUM (March 2024)