REACHING NEW HEIGHTS

Housing Finance Companies are riding a growth wave, with rising demand, untapped potential, and a shift to affordable housing setting them up for long-term success

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In recent years, India’s housing finance market has experienced robust growth, propelled by long-term structural drivers such as rising per capita income, increasing urbanization, a shift towards nuclear families, and government initiatives like ‘Housing for All’ and interest subsidies. Housing Finance Companies (HFCs) have capitalized on this momentum, expanding rapidly and offering immense opportunities for wealth creation.

The underlying property market remains strong, with reported monthly increases in sales across key regions. Notably, property sales rose by 74%, reaching 4.6 lakh units in CY24 compared to CY19.

Despite this dynamism, housing finance penetration in India remains relatively low. In FY23, the mortgage-to-GDP ratio stood at 12.3%, up from 6.5% in FY09. However, this is still considerably lower than in other countries: China at 28%, the European Union at 45%, and the United States at 60%.

The rapid pace of urbanization further exemplifies the potential for expansion in housing finance. Currently, about 36% of India’s population resides in urban areas, a figure projected to rise to 40% by 2030.

According to a Confederation of Indian Industry (CII) - Knight Frank India report, cumulative housing demand - accounting for both existing shortfalls and new requirements - is expected to reach 31.2 million units by 2030.

THE MARKET

Demand for housing naturally translates into demand for loans.

One report suggests that in India, loan dependency for property purchases could exceed 70% of the property's value. Broadly, the housing sector is categorized into affordable, mid-, and premium segments.