NEW DELHI: The assets under management (AUM) of affordable housing finance companies (AHFCs) are projected to rise to ₹2.5 lakh crore by FY2028, up from ₹1.4 lakh crore in March 2025, according to credit rating agency ICRA. The overall retail mortgage-backed loan portfolio of non-banking financial companies (NBFCs) and housing finance companies (HFCs) is expected to expand to ₹20 lakh crore by FY2028 from ₹13 lakh crore currently.
According to ICRA, mortgage loans extended by NBFCs and AHFCs are forecast to grow at a compound annual growth rate (CAGR) of 17–19% and 20–22%, respectively, over the next three years. This momentum is likely to be driven by continued demand for home loans and constrained availability of unsecured credit, which could redirect borrowers towards mortgage-backed borrowing.
“Over the next three years, retail mortgage loan growth will be driven by robust demand and the restricted availability of alternative credit options due to ongoing issues with unsecured lending,” said A M Karthik, senior vice president & co-group head – Financial Sector Ratings, ICRA. “This sector has traditionally demonstrated strong performance, marked by low loan losses and healthy business returns.”
Self-employed segment, small ticket loans driving AHFC growth
HFCs account for about two-thirds of the total mortgage loan book of ₹13 lakh crore, with AHFCs contributing 11%. AHFCs typically cater to a higher share of self-employed borrowers and offer more loans against property and smaller ticket-size home loans than larger, prime HFCs. Their business model is more operationally intensive, requiring wider branch networks and on-ground staff to manage originations and collections.
ICRA highlights that while AHFCs mitigate risks through conservative loan-to-value (LTV) ratios—averaging around 55%—and high-yield portfolios, operational stability and disciplined credit practices will be critical for sustaining growth at scale. Notably, loans for self-construction account for approximately 40% of the AHFC loan book.
Asset quality and profitability remain stable
Despite the rapid growth, AHFCs have maintained asset quality, with gross NPAs in the range of 1.1%–1.3% and credit costs averaging 0.3% of managed assets over the past three years, according to ICRA’s analysis of leading AHFCs covering about 70% of the sector’s AUM.
Earnings have remained healthy, with returns on average managed assets at 3.5%–3.6%, although operational expenses continue to be higher than their prime HFC counterparts. As competition intensifies and yield compression sets in, AHFCs will need to focus on improving operational efficiency to protect margins.
