“Retail Mortgage Loans to Hit ₹20 Trillion by FY2028 – ICRA Highlights Encouraging Growth from NBFCs, HFCs”

Credit rating agency ICRA predicts retail mortgage-backed loans by non-banking financial companies (NBFCs) and housing finance companies (HFCs) will grow to ₹20 trillion by FY2028, up from ₹13 trillion as of March 2025. Affordable housing finance companies (AHFCs) are expected to rise to ₹2.5 trillion from ₹1.4 trillion in the same period. ICRA forecasts mortgage loans by NBFCs and HFCs to grow at a CAGR of 17-19%, while AHFCs are projected to grow at a CAGR of 20-22% by FY2028. AHFCs have a higher share of self-employed borrowers and loans against property in their portfolio compared to other large HFCs focused on prime borrower segments. They have an average LTV of around 55% and a sizeable share of loans extended for self-construction of homes, which is expected to keep credit quality under control. ( Luxury Project).

India’s housing finance landscape is undergoing a major transformation. According to (ICRA), retail mortgage loans disbursed by Non-Banking Financial Companies (NBFCs) and Housing Finance Companies (HFCs) are expected to reach ₹20 trillion by FY2028, rising from an estimated ₹12.5 trillion in FY2024. This sharp growth is attributed to rising housing demand, favourable demographics, and supportive government policies.

Introduction: A Soaring Credit Outlook

India’s housing finance sector is set to see a massive expansion over the next few years. According to a report by ICRA, retail mortgage loans disbursed by Non-Banking Financial Companies (NBFCs) and Housing Finance Companies (HFCs) are projected to touch ₹20 trillion by FY2028, up from an estimated ₹12.5 trillion in FY2024. This growth is expected to be fuelled by increasing urbanization, stable interest rate expectations, and rising income levels across Tier II and Tier III cities.

Driving Forces Behind the Growth

• Urban Housing Demand: A growing middle class and nuclear family trend are pushing demand for affordable and mid-segment homes.
• Government Incentives: Schemes like Pradhan Mantri Awas Yojana (PMAY) and lower GST rates for affordable housing continue to stimulate buyer interest.
• Credit Penetration in Smaller Cities: NBFCs and HFCs are increasingly targeting Tier II and III locations, offering customized credit products with minimal documentation.

Role of NBFCs and HFCs

NBFCs and HFCs play a vital role in meeting the housing finance needs of underserved markets. Unlike traditional banks, they offer faster loan disbursements, flexible underwriting models, and tailored products for self-employed borrowers and low-income segments. ICRA points out that NBFCs and smaller HFCs are expected to gain significant market share due to their agility and strong distribution networks. However, the credit quality and funding costs will remain key determinants of profitability.

The Digital Edge: Tech-Driven Lending

Fintech integrations are becoming central to how NBFCs and HFCs operate. Digital platforms allow for faster customer onboarding, document verification, and EMI management. This tech adoption is expected to further reduce operational costs and expand reach, especially in semi-urban and rural regions. Players investing in AI-based risk profiling and paperless lending are likely to maintain a competitive edge in the evolving landscape.

Conclusion: A Trillion-Rupee Opportunity

ICRA’s forecast of ₹20 trillion in retail mortgage loans by FY2028 marks a significant milestone for India’s financial sector. As NBFCs and HFCs continue to push boundaries through innovation, inclusivity, and digital transformation, they are poised to play a central role in fulfilling India’s homeownership dreams.