The Indian housing finance sector is on the cusp of a transformation, driven by a mix of government initiatives, industry advancements, and technological innovation. As affordable housing remains a national priority, several measures are being undertaken to make homeownership accessible to the middle-income population, fueling growth across the housing finance landscape.
In an effort to promote affordable housing, the government is considering the establishment of a new fund for housing finance companies (HFCs) under the National Housing Bank (NHB). This fund will enable HFCs to borrow at concessional rates of 6.75–7%, significantly lower than the current borrowing cost of 9%. By passing on this benefit, HFCs can offer home loans at reduced interest rates of 11–12% compared to the prevailing rates of 13–14%. The scheme is expected to target borrowers with annual incomes ranging from ₹6 lakh to ₹7.5 lakh, with loans capped at ₹25 lakh. This initiative aligns with the government’s focus on affordable housing under the Pradhan Mantri Awas Yojana (PMAY), which has already delivered over 4.21 crore homes to economically weaker sections in the past decade and now aims to construct an additional three crore houses.
Industry discussions between representatives of HFCs, the NHB, and the Ministry of Finance have further emphasized the importance of such schemes to bridge the affordability gap. With affordable housing being central to the government’s vision, these efforts not only help aspiring homeowners but also strengthen the overall housing finance ecosystem.
Meanwhile, the private sector has also been making strides in revolutionizing housing finance. Digital-first mortgage company Easy Home Finance recently secured $35 million in a Series B funding round led by Claypond Capital and SMBC’s Asia Rising Fund. With a total capital infusion exceeding $100 million, Easy plans to expand its assets under management to $300 million within the next two years. The company’s tech-driven approach simplifies loan origination, credit appraisals, and property validations, providing middle-income consumers with a seamless home-buying experience. Easy’s commitment to leveraging technology underscores the sector’s shift towards digitization, ensuring greater efficiency and accessibility for borrowers.
Traditional players in the housing finance market have also displayed resilience amidst changing market dynamics. Bajaj Housing Finance, for instance, reported a robust 20.95% year-on-year growth in net profit for Q2 FY25, underscoring its strong financial position despite a recent decline in its stock price. The company’s performance highlights the sector’s ability to weather short-term challenges while capitalizing on long-term growth opportunities. Experts believe that anticipated interest rate cuts by the Reserve Bank of India (RBI) in 2025 could further enhance net interest margins for HFCs, boosting profitability and lending capacity.
The broader housing finance industry is poised for substantial growth, backed by these governmental and private initiatives. The proposed NHB fund, combined with technological advancements and strategic partnerships, reflects a collective effort to address India’s underpenetrated mortgage market, where home loans currently account for only 11% of GDP. With affordable housing gaining momentum, the housing finance sector is expected to play a pivotal role in fulfilling the aspirations of millions of Indians, shaping a more inclusive and accessible future for homeownership.
