NEW DELHI: According to ICRA, the assets under management (AUM) for affordable housing finance companies (AHFCs) are expected to grow to ₹2.5 lakh crore by FY2028, up from ₹1.4 lakh crore in March 2025. The total retail mortgage-backed loan portfolio for non-banking financial companies (NBFCs) and housing finance companies (HFCs) is projected to increase to ₹20 lakh crore by FY2028, rising from ₹13 lakh crore currently.
ICRA forecasts that mortgage loans provided by NBFCs and AHFCs will see a compound annual growth rate (CAGR) of 17–19% and 20–22%, respectively, in the next three years. This growth is anticipated to be driven by consistent demand for home loans and limited access to unsecured credit, prompting borrowers to turn to mortgage-backed options.
“In the coming three years, the growth in retail mortgage loans will be fueled by strong demand and the limited availability of alternative credit options amidst challenges in unsecured lending,” stated A M Karthik, Senior Vice President & Co-Group Head – Financial Sector Ratings, ICRA. “This sector has historically demonstrated resilience, characterized by low loan losses and solid business returns.”
Self-employed borrowers and small loans driving AHFC growth
HFCs represent about two-thirds of the total mortgage loan portfolio of ₹13 lakh crore, while AHFCs contribute 11%. AHFCs typically serve a larger portion of self-employed borrowers and provide more loans against property and smaller home loans compared to larger, peer HFCs. Their business model demands a wider operational framework, necessitating extensive branch networks and on-ground staff for originations and collections.
ICRA notes that while AHFCs manage risks with conservative loan-to-value (LTV) ratios averaging around 55% and high-yield portfolios, sustaining growth at scale will heavily rely on operational stability and disciplined credit practices. Notably, self-construction loans make up about 40% of the AHFC loan book.
Stable asset quality and profitability
Despite rapid growth, AHFCs have managed to maintain asset quality, with gross NPAs ranging from 1.1% to 1.3% and credit costs averaging 0.3% of managed assets over the past three years, as per ICRA’s analysis covering approximately 70% of the sector’s AUM.
Earnings have remained robust, with returns on average managed assets falling between 3.5% and 3.6%, although operational expenses still exceed those of prime HFCs. As competition intensifies and yields compress, AHFCs will need to enhance operational efficiency to safeguard their margins.
