Retail mortgage loans from non-banking firms are projected to reach twenty trillion rupees by fiscal year 2028. This growth is predicted by ICRA, a rating agency. Currently, these loans total about thirteen trillion rupees as of March 2025. Housing finance companies hold nearly two-thirds of this market. Affordable housing finance companies represent eleven percent of total assets under management.
ICRA expects affordable housing finance companies to grow their loan books. Their portfolio is set to increase from 1.4 trillion rupees to 2.5 trillion rupees. Non-banking financial companies should see mortgage loan growth of seventeen to nineteen percent annually. Affordable housing firms are expected to grow faster. Their annual growth rate is forecast at twenty to twenty-two percent through fiscal year 2028.
For leading affordable housing firms, non-performing assets have stayed low. These assets have been between 1.1 and 1.3 percent for three years. This is based on ICRA’s sample group. Their average credit cost was about 0.3 percent of managed assets.
Affordable housing companies maintain an average loan-to-value ratio around fifty-five percent. Many loans fund self-construction projects. These make up about forty percent of their assets. This factor should help keep credit quality stable.
Strong demand and fewer unsecured loan options will fuel mortgage growth. This trend is expected over the next three years. The sector generally shows good performance. It has low loan losses and healthy business returns. This statement comes from A M Karthik at ICRA Limited.
Good business margins and low credit costs boost earnings. Return on average managed assets for these firms is 3.5 to 3.6 percent. This is for the ICRA sample. Operating costs are higher than for firms focused on prime loans.
However, competition will likely increase. Larger companies will pose more of a challenge. Improving operational efficiency is key. This is important as yields decrease and margins shrink.
Affordable housing companies seem well-prepared for growth. Their current capital levels and earnings are supportive. Their managed gearing is about 3.5 times. Based on these factors, ICRA maintains a Stable outlook for the sector.