HFCs represent one of the core building blocks within the lending ecosystem in India. Intrinsic demand for housing in Indian cities has empowered the HFCs to be a vital player in this growing market. They are also among the fastest-growing segments within financial services due to strong momentum in real estate, urbanisation, and better affordability among borrowers.
Their loan books, asset quality, and borrower base have grown manifold in the last few years. In this blog, we discuss the key driving factors for HFCs in India.
Increased Housing Demand
The Indian home-loan market stood at USD 379.7 billion in 2025 and is expected to reach USD 932.3 billion by the year 2030, growing at a CAGR of approximately 15%-16%. Such rapid growth is underpinned by urbanisation, growth in household incomes, and high housing demand across metros and Tier II-III cities.
According to reports, the top 7 cities of India have witnessed the sale of more than 4.22 lakh homes valued at over Rs 5.59 lakh crore in the FY25, showing the strong demand for housing in India. This strong real estate action is underpinning home loan issuance, thus helping the HFCs to grow their portfolios.
Government Push for Affordable Housing
Government efforts have catalysed the demand for housing. Schemes such as PM Awas Yojana, interest subsidies, and tax deductions on home loans, incentives to builders for developing affordable units, have given a big boost to home ownership.
The mortgage demand is driven by the government’s vision to expand housing accessibility, coupled with infrastructure expansion in emerging cities. These policies help Indians own their own home, creating a regular inflow of borrowers for HFCs, especially in the affordable and mid-income segments.
Improving Real-Estate Transparency
Reforms like RERA and GST have made the real estate industry far more transparent for home buyers. It has improved the schedules of project execution, buyer confidence, and reduced the risk of stalled or delayed projects.
Home prices in major metros have grown in the range of 7-19% between July and September 2025, indicating steady demand for housing loans. For lenders, appreciation in the value of a house is an enhancement of collateral security and a reduction of credit default risk, thus enabling safer and more predictable lending for HFCs.
Dominance of Affordable and Mid-Income Housing
The ₹25–75 lakh bracket accounts for a sizable percentage of the housing demand in India. This segment has the most significant share in terms of home sales, with growth complemented by the rise in first-time homebuyers and nuclear families.
With more developers now focusing on projects in the affordable and middle-income segments, HFCs would gain even more from deeper market penetration and sustained demand for loans, leading to an increase in their stock prices, like the Bajaj Housing Finance share price.
Borrower Income and Credit Profile Formalisation
Increased adoption of digital payments, implementation of GST, and documentation have standardised the financial system in India. Such initiatives would widen the number of citizens with a verifiable financial footprint that would, in turn, help lenders choose the credentials of a borrower for any short-term requirement of funds much more accurately.
This has broadened the market of borrowers for HFCs, in particular, the self-employed, who conventionally had been perceived as presenting a higher risk, given the inconsistencies in their documentation. The improvement in credit transparency reduces underwriting risk and enables faster loan issuances for HFC, enabling them to soon become a part of the upcoming IPO news.
Favourable Interest Rates
A competitive financial landscape and favourable lending rates make EMI more affordable for homebuyers. Even with periodic fluctuations, home loans offer low-priced credit products in India. While increasing frequently, the long-term mortgage rates remain structurally attractive, therefore encouraging more households to shift from renting and thereby increasing home-loan disbursals.
Better affordability of home loans has also decreased the likelihood of repayment stress, hence enabling HFCs to sustain strong asset quality over time.
Conclusion
Indian Housing Finance Companies are well-placed to record steady long-term growth with increasing home-ownership aspirations, supported by favourable government policies, property prices, and increased formalisation of income for borrowers. With the mortgage market set to almost double by 2030 from the existing market, HFCs will be in a better position to seize the surge in credit demand from both the urban and emerging markets.
Their fast-growing portfolio, disciplined lending, and consistent asset quality make them one of the most resilient and growth-ready segments in India’s financial landscape.
Stay in touch to get more updates & alerts on Technofeed! Thank you
