Individual housing finance market to grow to Rs 77-81 trn by FY30: Report

The individual housing finance market is expected to grow at a compound annual growth rate (CAGR) of 15-16 per cent to Rs 77-81 trillion by FY30 from its current valuation of Rs 33 trillion, according to a report by CareEdge Ratings. The report said robust structural elements and favourable government incentives will make the housing finance segment an attractive asset class for lenders.

 

The residential properties market remains buoyant, a key driver of the housing finance industry, with an absolute growth of 74 per cent since calendar year (CY) 2019. While sales performance in CY24 normalised, it still reflected sustained buyer confidence.

 

Banks dominate the housing loan market, with a market share of 74.5 per cent as on March 31, 2024, facilitated by cost of funds advantage, reach, portfolio buyouts, and co-lending arrangements.

 

During FY21-FY24, banks have grown at a CAGR of 17 per cent in the housing loan space, while housing finance companies (HFCs) have grown by 12 per cent.

 

The report says both banks and HFCs have ample space to grow, given the growth potential of the housing finance market.

 

According to the report, HFCs primarily operate in ticket sizes of less than Rs 30 lakh, which accounted for 53 per cent of total assets under management (AUM) as of March 2024.

 

Of late, there has been a gradual rise in the proportion of AUM with ticket sizes ranging between Rs 30-50 lakh and a decline in the proportion of AUM in the less than Rs 30 lakh ticket size category.

 

“This aligns with the premiumisation trend witnessed in the residential property market. Notably, ticket sizes for HFCs are not growing at the same rate as that for residential property launches, suggesting that the demand for higher ticket size loans is likely being fulfilled by banks and partly self-funded by the buyers,” said Geeta Chainani, associate director, CareEdge Ratings.

 

The segment is expected to grow 12.7 per cent year-on-year (Y-o-Y) and 13.5 per cent Y-o-Y in FY25 and FY26, respectively, on the back of healthy equity inflows and capital reserves. The retail segment remains the primary growth driver for HFCs, with cautious growth observed in the wholesale segment.