Something quiet is happening across Indias towns and cities. A young couple saves a portion each month from earnings that are modest but steady. A self-employed carpenter earns enough to stop renting and start dreaming of asset ownership. A daily-wage worker in a factory puts aside what she can, because the idea of a home has been with her longer than any calculation. Whether it begins with a payslip or a cash payment, with a degree or a trade, with a city posting or a small-town workshop - the journey towards owning a home is Indias most widespread, most quietly determined aspiration. Long before a loan application is filed, this chain of events has already begun to shape the most important financial market in Indias growth story.
What has changed is not the aspiration - it has always been there. What has changed is the economics around home ownership. Indias real per capita income has more than doubled since FY14. 1.2 to 1.4 cr workers enter the formal economy every year as evidenced by the net new EPFO registrations. Cities that were peripheral a decade ago are now thriving employment centres.
And across this expanding geography of aspiration, a new cohort of first-time homebuyers is crossing the affordability threshold - not just because of any subsidy, but because their earnings have simply reached the point where a home ownership becomes possible. This Management Discussion & Analysis traces that journey - from the macro forces reshaping the global economy, through Indias structural momentum, the policy architecture enabling housing supply, and the industry dynamics that define how formal credit reaches these households. At each step, the evidence points in the same direction. The question this analysis addresses is not whether Indias affordable housing finance market will grow. It is how large, how fast, and over what horizon.
01 Global Context
A Decade of Outperformance — Not a Moment, a Trajectory
FY26 unfolded against a global backdrop that was not just uncertain, but increasingly non-linear - marked by geopolitical flashpoints, evolving trade frictions, sharp movements in commodity prices, and episodic stress in financial markets. Events over the year reinforced how quickly global narratives can shift - from trade tensions to AI exuberance to energy security concerns - driving volatility across asset classes and capital flows. The risk of supply disruptions, particularly around critical routes such as the Strait of Hormuz, has further amplified concerns around energy prices, inflation trajectories, and external balances for import-dependent economies.
Indias response to this environment was not to insulate itself, but to compound from a position of structural strength. The growth of the past decade was anchored not in cyclical tailwinds but in strengthening domestic fundamentals: sustained public capital expenditure, formalisation of the economy, balance sheet repair across corporates and banks, and continued deepening of financial markets. Institutional capacity has improved meaningfully, enabling more effective policy responses to external disruption. FY26 reflected an economy building endurance - positioning itself for sustained longterm expansion rather than defending against transient shocks.
Performance of the Indian Economy — FY26
a) Indias Ascent in the Global Economic Order
The Indian economy has risen from $2.1 trillion in FY15 to ~$4.2 trillion in FY26, doubling in dollar terms within a single decade.
Crucially, India retains its standing as the fastest-growing major economy in the world and one of the very few large nations projected to sustain GDP growth consistently above 6% over the medium term. By FY31, Indias economy is projected to reach $6.8 trillion - narrowing the gap with Germany and positioning India firmly on the threshold of the global top three. Fuelled by robust consumer spending and positive investment sentiment, India is consolidating its position as the primary engine of global incremental growth. Looking further ahead, the Viksit Bharat 2047 vision envisions Indias GDP reaching $ 30 trillion by FY47, an approximate eightfold increase from the current $4.2 trillion (2026).
Exhibit— Indias projected GDP ranking journey: 6th (2026) —> 4th (2027) —> 3rd (2031)
| Rank | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 |
| 1 | USA | USA | USA | USA | USA | USA | USA | USA | USA | USA | USA | USA | USA | USA | USA |
| 2 | China | China | China | China | China | China | China | China | China | China | China | China | China | China | China |
| 3 | Japan | Japan | Japan | Japan | Japan | Japan | Germany | Germany | Germany | Germany | Germany | Germany | Germany | Germany | India |
| 4 | Germany | Germany | Germany | Germany | Germany | Germany | Japan | Japan | Japan | Japan | India | India | India | India | Germany |
| 5 | UK | UK | UK | UK | UK | India | India | India | UK | UK | Japan | Japan | UK | UK | Japan |
| 6 | India | France | India | France | India | UK | UK | UK | India | India | UK | UK | Japan | Japan | France |
| 7 | France | India | France | India | France | France | France | France | France | France | France | France | France | France | Canada |
| 8 | Italy | Italy | Italy | Italy | Italy | Russia | Italy | Italy | Russia | Italy | Italy | Italy | Italy | Italy | Italy |
| 9 | Canada | Canada | Canada | Canada | Canada | Canada | Canada | Canada | Italy | Russia | Canada | Canada | Canada | Canada | Russia |
| 10 | Russia | Russia | Russia | Russia | Russia | Italy | Russia | Russia | Canada | Canada | Russia | Russia | Russia | Russia | Russia |
Source: IMF World Economic Outlook (April 2026) GDP at Current Prices
Exhibit - India projected to continue to be the fastest growing major economy in the world
b) Sovereign Credit Rating Upgrade
FY26 marked a watershed moment: India received credit rating upgrades from three agencies - Morningstar DBRS (May), S&P (August) and R&I (September). S&P Global Ratings Indias sovereign credit rating upgrade from BBB- to BBB with a Stable outlook, was Indias first upgrade from a major agency in nearly two decades. The upgrade reflects stronger macroeconomic fundamentals, including sustained economic growth, improving fiscal discipline, stable inflation, and healthier banking and corporate balance sheets.
Exhibit: Indias Sovereign Credit Ratings and Upgrade History
| Rating Agency | Current Rating | Outlook | Previous Rating | Key Upgrade / Change History |
| S&P Global Ratings | BBB | Stable | BBB- | Upgraded to BBB (Aug 2025); previously upgraded to BBB- (2007) |
| Morningstar DBRS | BBB | Stable | BBB (low) | Outlook upgraded to Stable (2025) |
| Rating and Investment Information, Inc. | BBB+ | Stable | BBB | Upgraded to BBB+ (Sep 2025) |
Source: S&P Global Ratings, Morningstar DBRS, Rating and Investment Information Inc.
A higher sovereign rating strengthens investor confidence and improves Indias standing in global capital markets. Over time, this can support greater capital inflows & improve access to long-term funding for infrastructure, investment, and economic growth. For housing finance specifically, a higher sovereign floor means every institution in the credit chain -from NHB to HFCs to end-borrowers- benefits from structurally lower funding costs over the coming years.
c) Global Capital allocation has favoured India over the last few years
India has become an attractive destination for FDI in recent years, influenced by several factors that have boosted FDI. In the Global Innovation Index (GII) 2025, India secured the 38th position among 139 global economies - a significant improvement from its 81st rank in 2015, demonstrating Indias commitment to fostering a robust innovation ecosystem and a collaborative environment for businesses. Indias cumulative Gross FDI inflow stood at US$ ~850 billion between FY14 - FY26, due to reasons including governments efforts to improve the ease of doing business and easing of FDI norms.
Exhibit: Indias Sustained FDI Momentum Signals Strong Investor Confidence
Indias expanding weight in the MSCI Emerging Markets (EM) index, Bond market inclusion by JP Morgan are attracting global investors seeking long-term growth exposure. Indias infrastructure ecosystem continues to attract significant private capital, with the World Bank ranking it among the top five global destinations within low- and middle-income economies.
Foreign Direct Investment continues to anchor Indias long-term growth trajectory, supported by consistent policy reforms, expanding market access, and deepening global integration. Strong capital inflows in FY26, alongside the steady expansion of high-technology, manufacturing, and green energy sectors, reflect sustained investor engagement despite global volatility. Recent trade agreements with key partners, including the European
Union and other strategic economies, are widening export access and strengthening Indias integration into global value chains. Continued liberalisation across sectors, infrastructure scale-up, renewable energy expansion, and digital transformation initiatives are further enhancing Indias competitiveness, positioning the country as a preferred destination for strategic, longterm capital in the years ahead.
Sectorally, FDI inflows are increasingly concentrated in high-growth and strategically important areas. Few recent investments in these sectors are captured below:
• Semiconductors and advanced manufacturing: Under the India Semiconductor Mission, 10 projects across six states have been approved with cumulative investments exceeding ~US$ 18-19 billion. These include Indias first Silicon Carbide compound fabrication unit and advanced packaging facilities, strengthening domestic manufacturing capabilities and supply chain resilience.
• Financial services and fintech: India remains among the leading global destinations for fintech funding, supported by a stable regulatory framework and expanding financial inclusion, as reflected in the RBIs Financial Inclusion Index improving from 64.2 to 67 in FY25. As per DPIIT, the services sector, which includes Financial, Banking, Insurance, Non-Financial / Business, Outsourcing, R&D, Courier, Tech. Testing and Analysis & Other segments, received the investment of USD 9.3 billion in FY25 with ~41% increase as compared to USD 6.6 billion investment in FY24.
• Infrastructure and energy: India ranks among the top five globally in private infrastructure investment, while record renewable energy capacity additions in 2025 (adding 44.51 GW of capacity till November, nearly double the 24.72 GW added during the same period last year) highlight strong momentum in sustainable infrastructure and long-term capital deployment. The infra & energy sector received the investment of USD 6.8 billion in FY25.
Government initiatives continue to play a catalytic role in attracting foreign capital: Targeted interventions such as the Production-Linked Incentive (PLI) schemes, semiconductor incentives, and progressive sectoral liberalisation - including allowing up to 100% FDI in insurance (raised from 74%), space, defence (under the government route), and key infrastructure segments such as brownfield airports and MRO (Maintenance, Repair, and Overhaul) - reflect a sustained commitment to improving ease of doing business. In line with Indias vision of becoming Atmanirbhar Bharat, the Government launched Production Linked Incentive (PLI) schemes across 14 key sectors beginning FY21, with a total outlay of Rs1.97 lakh crore, aimed at strengthening domestic manufacturing capabilities and boosting exports. As of December 31, 2025, the schemes have attracted investments exceeding Rs2.16 lakh crore and generated incremental production and sales of over Rs20.41 lakh crore. The PLI initiatives have also created employment for more than 14.39 lakh people (direct and indirect), with 836 applications approved across the 14 sectors under the PLI framework.
02 Indias Structural Tailwinds
The Macro Layout — The Architecture of a Compounding Economy
India today sits at an interesting macroeconomic juncture - one where structural strength coexists with near-term uncertainty. Growth remains resilient, inflation has moderated meaningfully, the interest rate cycle appears to be at or near its lowest point, and fiscal consolidation continues to progress in a measured manner. While this alignment is not perfect - and is being tested by external shocks such as geopolitical tensions, commodity volatility, and intermittent capital flow pressures - the overall direction of key macro variables remains among the most constructive seen in over a decade.
Recent global developments have reinforced the reality that macro stability is increasingly being shaped by external factors - particularly energy prices, trade disruptions, and shifting risk appetite of global capital. The scenarios such as sustained elevation in crude prices or disruptions in key supply routes could temporarily widen the current account deficit, exert pressure on inflation, and trigger bouts of FII outflows. However, India enters this phase from a position of significantly improved macro resilience - characterised by lower oil imports (oil imports as % of GDP declined from over 8.5% in FY13 to ~4.8% in FY25, as per HDFC Mutual Funds Report), a contained current account deficit (CAD as % of GDP has declined from ~4.8% in FY13 to ~0.7% in FY25), strong FX reserves (~US$ 700 billion as of April 2026), and a more diversified export base.
Importantly, while near-term volatility - driven by oil prices, currency movements, or global liquidity cycles - may create intermittent disruptions, is likely to be transient. Indias macro framework today is far more robust than in prior cycles, enabling it to absorb shocks without derailing its long-term growth trajectory.
a) GDP Growth: Structural, not cyclical
As per the First Advance Estimates of Annual GDP for FY26 released by MoSPI in Jan 2026, the Real GDP (base year 2011-12) was estimated to grow by 7.4%. Real GDP is estimated to attain a level of Rs201.9 lakh cr in FY26, against Rs188 lakh cr (Provisional estimate) for the FY25, registering a growth rate of 7.4%.
As per the Second Advance Estimates by MoSPI, as India shifts to new GDP series with base year 2022-23, the Real GDP which is for FY26 is projected to grow at 7.6%. Under the new series, the Real GDP in FY26 is estimated to attain a level of Rs322.6 lakh crore while the Nominal GDP is estimated Rs 345.5 lakh crore in the year FY26.
Quarterly real GDP growth (new series) held steady in FY26 at 6.7% in Q1, 8.4% in Q2, & 7.8% in Q3 indicating sustained momentum. Crucially, the composition of growth matters as much as the headline. Between FY17 and FY26, the services share increased from ~61% to ~65%, industry moderated from ~23% to 21%, and agriculture remained at ~14-15%. Financial, real estate and professional services contributed an estimated 26% of GVA in FY25.
b) CPI inflation & Industrial Activity Indicators:
Indias CPI inflation trajectory over the past five years tells a clear story of moderation. From elevated levels of ~7% in FY22, inflation declined to ~4.9% in FY24 and further to ~3.3% in FY25. In FY26, inflation continued its downward trajectory - CPI fell to a multi-year low of ~0.25% in October 2025 before edging up as base effects faded. The CPI inflation averaged at 3.4% for FY26, well within its 4?2% target band.
This gradual shift toward services-led growth reflects rising formal employment, expanding financial intermediation, technology adoption, and urban economic activity. Sector-wise projected growth trend for FY26 further reinforce this balance:
• Services growth remained strong at ~8-9% in FY26P
• Industry recovered to ~5-6%, supported by infrastructure and manufacturing
• Agriculture delivered stable mid-single digit (~3%) growth
Industrial activity strengthened through FY26, albeit with expected month-to-month volatility. After moderating during parts of FY25, IIP growth accelerated meaningfully in the second half of FY26, reaching a two-year high of ~8% in December 2025. Composite PMI remained consistently above 50 (expansion threshold) throughout the period. Readings largely ranged between 58 and 63, signalling sustained growth in output, new orders, and business activity.
c) RBI Monetary Policy Easing
In response to the easing inflation, the RBIs Monetary Policy Committee (MPC) cumulatively reduced the repo rate by 100 basis points during its meetings in FY26. Currently, the repo rate stands at 5.25%. These reductions were aimed at boosting credit flow, investment, and overall economic activity. Furthermore, in consideration of the prevailing and expected inflation-growth dynamics, the MPCs stance was changed from accommodative to neutral in June 2025. This neutral stance has been consistently maintained since then, allowing the MPC the flexibility to respond to economic conditions as necessary.
As per the Economic Survey Report 2025-26, in response to the 100-bps cumulative cut in the policy repo rate from 6.25% during FY26, the weighted average lending rates (WALR) of the Scheduled Commercial Banks (SCBs) declined. During April-November 2025, the WALR of SCBs on fresh rupee loans decreased by 64 basis points, standing at 8.7% in November 2025. Similarly, the WALR of SCBs on outstanding rupee loans has decreased by 56 basis points over the same period, standing at 9.2% in November 2025, reaching its lowest level recorded since September 2022.
d) Fiscal Discipline with Growth Orientation
FY26 also reinforced the governments commitment to credible fiscal consolidation. The Union Budget 202627 reaffirmed a fiscal deficit target of ~4.4% of GDP for FY26 with further projected improvement to 4.3% in FY27, continuing the glide path from pandemic-era highs of ~9.2% (FY21). Importantly, consolidation has been achieved without cutting back on capital expenditure.
The rise in global crude oil prices amid the West Asia conflict could exert some pressure on Indias fiscal position, with the fiscal deficit potentially drifting moderately above the Budget Estimate in FY27.
Revenue mobilisation has also strengthened alongside consolidation efforts. As per the Economic Survey Report 202526:
• The Centres revenue receipts strengthened significantly to 9.2% of GDP in FY25, rising from an average of about 8.5% of GDP in the pre-pandemic period (FY16-FY20) to ~9.1% in the post-pandemic years (FY22-FY25).
• Gross tax collection is ~11.4% of GDP, with increased share of direct tax from 5.9% in FY18 to ~6.8% in FY26. The income tax returns filed increased from 6.9 cr in FY22 to 9.2 cr in FY25 at 10% CAGR.
• Share of direct taxes in total collections has increased to 58.8% in FY25, signalling a gradual shift toward a more stable and progressive revenue base. It increased from 51.9% in the pre-pandemic period (FY16-FY20) to 55.5% (FY22-FY25) in the post-pandemic years.
Exhibit: Improving Tax Buoyancy Driven by Shift Toward Direct Taxes (% of GDP)
e) Credit Growth and Asset Quality
Indias banking system entered FY26 from a position of strengthening balance sheets and improving credit discipline. At the same time, asset quality improved significantly. As illustrated in the exhibit below, gross advances of scheduled commercial banks have expanded steadily since FY17 at CAGR of ~11%, while the gross NPA ratio has declined sharply from a peak of 11.2% in FY18 to nearly 2.2% by FY25. This improvement reflects stronger underwriting standards, balance sheet repair across corporates, and sustained recovery efforts within the banking sector.
f) Exports
While domestic drivers remained the primary source of growth over the years, external demand, with a share of ~21% of GDP in FY25, also supported growth. In FY25, the exports of goods and services grew by ~6% y-o-y, exceeding the growth seen in the same period last year of ~1% supported by trade diversification. Services exports have continued to provide a stable anchor for growth, partially offsetting the greater volatility in goods exports, amid tariff related uncertainties. At the same time, efforts to strengthen domestic manufacturing and integrate with global value chains are expected to support merchandise exports over the medium term.
g) System Liquidity: Volatile Through FY26, Decisively Recovered in Q4
While the headline narrative of FY26 was one of moderating inflation and a softening rate cycle, liquidity conditions told a more nuanced story. Despite the RBIs accommodative stance and successive repo cuts, system liquidity remained volatile for much of the year - a paradox that shaped funding conditions across the financial sector.
Liquidity conditions during the year remained volatile, despite an overall accommodative monetary policy stance. While the year began on a relatively supportive footing - with surplus liquidity averaging ~Rs2.1 lakh cr, in
Q2 FY26 - conditions tightened as the year progressed. By Q4 FY26, system liquidity had moderated to ~Rs1.6 lakh cr, driven by a combination of advance tax outflows, seasonal currency leakage, & sustained credit offtake.
In response, RBI actively calibrated liquidity through a series of measures, including open market operations (OMO), FX swaps, and CRR adjustments. The RBI has maintained sufficient liquidity to meet the productive requirements of the economy with a daily average surplus of around Rs3.7 lakh cr seen in early April 2026, following the previous tightening.
The alignment of Indias growth, inflation, rate, and fiscal variables defines a macro environment for housing finance that is, by historical comparison, quite supportive. What remains is to understand the demand it is about to unlock.
03 The Customer
Indias Middle Class in Motion: Structural Demand Driver
Indias housing demand is increasingly shaped not just by its demographic advantage, but by the conversion of that demographic potential into income growth and credit eligibility. Indias housing demand is not principally a story of population size - it is a story of income formalisation, urbanisation, and the structural expansion of the mortgage-eligible cohort.
The above three forces are driving this simultaneously.
a) The Arithmetic of Indias Home-Buying Cohort
The population in India is projected to reach 1.5 billion by 2031, indicating a significant expansion in the countrys demographic landscape.
This demographic dividend creates the potential for housing demand. The ability of this cohort to translate aspiration of owning a house into ownership will be driven by income growth and access to credit. The chart below shows a steady rise in the working-age population, especially the 30-59 age group, which is projected to increase from 31% in 2001 to 40% by 2030.
A key driver for the housing demand is the rapid expansion of the middle-income segment (Rs2 to 10 lakh), which forms the core customer base for housing finance. Middle-income households are projected to grow from ~4.1 cr in FY12 to ~18.1 cr by FY30, representing a CAGR of ~8.6%. This segment expansion is particularly visible in semi-urban and emerging markets, where rising incomes are translating into first-time home ownership demand.
b) Income Growth: Converting Aspiration into Affordability
Demographic scale is necessary but not sufficient. What converts aspiration to eligibility is income. Indias per capita (at current prices) earnings capability has trended upward consistently, rising from approximately Rs1,05,000 in FY17 to Rs2,20,000 in FY26 as per First Advance Estimates, more than doubled in a decade. Concurrently, the individual housing loan-to-GDP ratio expanded from 8.6% to 11.2%, suggesting a direct correlation between rising incomes and increased homeownership aspiration. Further, as per the Economic Survey 2025-26, personal income tax collections have nearly doubled over 3 years, from Rs6.7 lakh cr in FY22 to Rs12 lakh cr in FY25 (RE) - a signal of rising household earnings and expanding formal employment.
c) Urbanisation: The Migration That Feeds Our Markets
Indias urbanisation is a key structural driver reshaping economic activity, consumption, and financial inclusion. Cities are increasingly becoming centres of productivity, employment, income generation, and wealth creation, driving growth in housing demand, credit penetration, and consumer spending. This trend is reflected in the rapid expansion of large urban centres - according to Knight Frank Research, the number of Indian cities with populations above 10 lakh is expected to rise from 23 in 1991 to 71 by 2030, including 8 mega cities with populations exceeding a crore each. As urban centres expand, the need for infrastructure and housing will continue to grow, with sustained demand for affordable and mid-income housing driven by Indias rising middle- income population.
Indias urbanisation trajectory has been steadily rising over the past few decades. As of 2021, approximately 35% of the population resided in urban areas. According to NITI Aayogs Viksit Bharat 2047 vision, this is expected to increase to ~51% by 2047 and further to ~65% by 2070. In absolute terms, the urban population - estimated at ~47cr in 2020 - is projected to expand significantly to ~81 cr by 2047.
Urbanisation acts as a multiplier - enhancing productivity, deepening financial inclusion, and creating sustained demand across sectors such as housing, infrastructure, and financial services. For the housing finance ecosystem in particular, this migration-led expansion of urban centres represents a long-term, durable demand driver.
d) Nuclear Family Formation: More Units, Same People
Urbanisation has been accompanied by a shift toward nuclear family structures, resulting in a consistent decline in average household size. Census data shows that average household size reduced from 5.5 persons in 1991 to 5.3 in 2001 and further to 4.5 in 2011. Looking ahead, the Viksit Bharat 2047 report projects urban household size to decline from 4.1 in FY25 to 3.4 by 2050, while rural household size is expected to decrease from 4.4 to 3.8 over the same period - highlighting an ongoing structural contraction in household size.
This trend is being driven by increased migration to urban centres, evolving lifestyles, and a rising preference for independent living. As households become smaller, the demand for housing units increases even in a scenario of moderate population growth, thereby creating a sustained structural need for additional housing supply.
e) Formalisation: Expanding the Credit-Eligible Customer Base
The single most structurally significant shift in Indias customer base over the past few years is formalisation.
i. The EPFO payroll data highlights sustained workforce formalisation in India, with consistent growth in net payroll additions across prime earning age groups, particularly 18-35 years which has grown at CAGR of ~14% in past 6 years, indicating a rising share of salaried and formally employed individuals entering the financial system. This trend strengthens income visibility, repayment assessment, and credit underwriting capabilities for housing finance companies, while also expanding the addressable base of first-time homebuyers with stable and documentable income profiles.
ii. The steady increase in GST registrations from 122.9 lakh in Jun-19 to 153.6 lakh in Jun-25 reflects the continued formalisation of Indias small business ecosystem, bringing a larger pool of self-employed and MSME borrowers into the documented economy.
iii. India has used technology as a key enabler in expanding the credit-eligible customer base. Digital infrastructure thus acts as a multiplier, amplifying the impact of income growth and urbanisation on overall economic efficiency. The currency in circulation in the economy has reduced from its peak of 14.4% of GDP to ~11.3% of GDP with corresponding increase in the digital transactions.
Every digital transaction creates a data trail. Every GST- registered business generates auditable income records. Every EPFO enrolment formalises employment. Together, these trails are converting previously unassessable borrowers - self-employed workers, small traders, gig economy participants - into underwriteable credit profiles. The addressable market for formal housing finance is expanding not because more people want homes, but because more of those who always wanted homes can now be assessed.
Indias mortgage-eligible middle class is being formed right now, by rising incomes, formalisation, and the shift of a working-age population into its peak borrowing years. The customers are ready. The question is whether formal credit will reach them.
04 Policy Architecture
Governments Housing Commitment — The Enabling Architecture
Demand, as established above, is growing. What determines whether that demand converts into formal loan originations at scale is the policy environment in which lenders operate. Indias government has, over the past decade, progressively repositioned itself as a facilitator in the affordable housing cycle through a suite of interventions that simultaneously expand the addressable market, reduce lender risk, and improve borrower affordability.
a) PMAY 2.0: Scaling the commitment to 3.0 cr homes
The Union Budget 2026-27 significantly increased allocations for PMAY-Urban to Rs21,625 cr, compared with Rs7,800 cr in the revised estimates for FY26, representing a 177% increase, signalling renewed policy emphasis on affordable housing.
The Ministry of Housing and Urban Affairs launched PMAY-Urban (PMAY-U) on June 25, 2015, to address the shortage of urban housing among the EWS/low-income group (LIG) and middle-income group (MIG) population, including slum dwellers, and provide pucca houses to all eligible urban households by 2022 (extended to 2024 and then 2029).
PMAY 2.0 was launched in September 2024 with a goal to construct 3.0 cr houses (rural and urban) over FY25 to FY29. A key difference between the two phases of the scheme is the nature of the interest subsidy. Under the erstwhile scheme, the interest subsidy was credited upfront to the loan account of the beneficiary with the primary lending institutions, resulting in reduced equated monthly instalments. Under PMAY 2.0, the interest subsidy will be released in five equal yearly instalments. Further, if the borrower has taken a housing loan from one primary lending institution and later transfers the balance to another, the beneficiary will not be eligible to claim the interest subsidy again. This significantly reduces balance transfers among the lenders.
As of May 4, 2026, overall sanctions of 1.3 cr houses have been sanctioned under the PMAY-U & PMAY-U 2.0 schemes with a total commitment of Rs2.1 lakh cr. Out of the committed amount, Rs1.8 lakh cr have already been released in the beneficiaries accounts.
The below provides the analysis of both the schemes:
| Aspect | PMAY 1.0 (Achieved) | PMAY 2.0 (Target) |
| Launch Year | 2015 | 2024 |
| Housing Target (cr) | 4.95 cr | 3.0 cr |
| - Urban | Successfully constructed 1.1 cr houses (against target of 2.0 cr) | 1.0 cr |
| - Rural | Successfully completed 2.6 cr houses (against target of 2.95 cr) | 2.0 cr |
| Beneficiary Eligibility Criteria | ||
| - Urban | EWS: Up to Rs3 lakh | EWS: Up to Rs3 lakh |
| LIG: Rs3-6 lakh | LIG: Rs3-6 lakh | |
| MIG I: Rs6-12 lakh | MIG: Rs6-9 lakh | |
| MIG II: Rs12-18 lakh | ||
| - Rural | Rural BPL households | Rural BPL households |
| Up to Rs3 lakh | Up to Rs3 lakh | |
| Interest Rate Subsidy | ||
| - Urban | EWS: 6.5% | |
| LIG: 6.5% | ||
| MIG I: 4% | 4% across all income groups | |
| MIG II: 3% | ||
| - Rural | 3.0% | 3.0% |
b) Infrastructure Capex: Creating New Housing Markets
Indias sustained focus on infrastructure development has become an important driver of productivity and economic expansion. Over the past decade, public capital expenditure has increased significantly, rising from Rs2.8 lakh cr in FY17 to reaching Rs12.2 lakh cr by FY27 as per Union Budget 2026BE. As a share of GDP, public capex
has remained elevated at around 3.0-3.2% in recent years, reflecting the governments continued emphasis on infrastructure-led growth. Investments across roads, railways, ports, airports, logistics parks, and urban infrastructure are improving connectivity, reducing travel time, and lowering logistics costs across the economy.
Infrastructure investment converts Tier 3 agglomerations into Tier 2 employment hubs; it turns peri-urban belts into commuting catchments; it lifts land values, which lift collateral values; and it lifts local employment, which in turn lifts debt-service capacity.
c) Housing Policy & Urban Development (Smart Cities Mission)
Beyond housing-specific interventions, continued public investment in urban infrastructure is playing a critical role in shaping the depth and sustainability of housing markets across cities. Budgetary allocations in Union Budget 2026-27 towards Metro and Mass Rapid Transit Systems (MRTS) (Rs28,740 cr), AMRUT-led urban infrastructure development (Rs8,000 cr), and urban sanitation initiatives under Swachh Bharat Mission - Urban (SBM-U) (Rs2,500 cr) have been scaled up, enhancing connectivity, improving service delivery, and elevating overall urban liveability.
In parallel, targeted livelihood-focused schemes such as PM Street Vendors Atmanirbhar Nidhi (PM SVANIDHI) launched in CY2020 - provides collateral-free working capital loans to street vendors - has witnessed increased allocations of Rs900 cr in FY27. As per the impact assessment study of this scheme covered in Economic Survey Report 2025-26, the welfare effects of PM SVANidhi extend beyond enterprise metrics. The improved income in informal segment have led to housing upgrades for 39% of households, better food access for 55%, more affordable healthcare for 44%, and enhanced educational opportunities for 50%. These multi-dimensional gains reflect a broader policy emphasis on strengthening income stability and resilience within the informal sector, which forms a significant share of the urban workforce. Collectively, these interventions are addressing structural constraints within urban ecosystems - supporting both the supply side through improved infrastructure and the demand side by enhancing income visibility - thereby enabling more sustainable and inclusive growth in urban housing markets.
d) RERA and Market Transparency
RERAs implementation has materially improved market transparency. As of December 2024, 1.4 lakh projects are registered (doubled up from ~57,000 in FY21) and ~95,000 agents are registered (2x growth from ~44,000 in FY21). Greater project registration means improved delivery predictability, lower construction risk for end- buyers, and better collateral quality for lenders. In a market where project delays historically represented a significant source of NPA formation in real estate loans, RERAs formalisation effect is a structural improvement in the risk profile of new disbursements.
e) Priority Sector Lending: Expanded Eligibility Widens the Addressable Market
The RBIs revised PSL Master Directions (2025) increased housing loan limits eligible for priority sector classification: Rs50 lakh in metropolitan centres (population 50 lakh+), Rs45 lakh in cities with 10-50 lakh population, and Rs35 lakh in smaller towns. The corresponding property value caps have been set at Rs63 lakh, Rs57 lakh, and Rs44 lakh respectively. This expansion directly increases the pool of loans that banks and HFCs can classify as priority sector - creating a structural incentive for lenders to extend credit deeper into the affordable housing market and broadening the competitive playing field in a segment that was previously served by fewer participants.
f) Fiscal reforms: Rising disposable income and expanding household purchasing power
Recent fiscal policy measures undertaken by the Government of India - particularly changes in personal income taxation and rationalisation of indirect taxes - are expected to meaningfully enhance disposable income for households, especially within the emerging middle- income segment. These reforms are designed not only to provide direct financial relief to taxpayers but also to stimulate consumption, strengthen domestic demand, and support the broader economic growth cycle.
i) Direct Tax Changes: Expanding Household Liquidity
The introduction of a higher tax-free income threshold and revised slab rates under the new tax regime have significantly eased the tax burden on middle-income taxpayers, with many either paying lower taxes or becoming fully exempt from income tax. Under the Union Budget 2025-26, individuals earning an average monthly income of around Rs1 lakh have been provided meaningful tax relief. Notably, salaried individuals with annual income up to Rs12.75 lakh are not required to pay any income tax under the new regime, after considering the standard deduction. These reforms reflect the Governments broader fiscal objective of fostering a consumption-led growth model by enhancing disposable incomes, thereby supporting stronger household spending and overall economic activity.
ii) GST Rationalisation: Reducing the Cost of Living
Under the Central Goods and Services Tax (CGST) rules, preferential rate of 1% apply to residential units with value <Rs45 lakh and carpet area <60 sq. m (metro) / <90 sq. m (non-metro). The GST overhaul simplified the tax structure and reduced tax rates on a wide range of consumer goods and services, particularly those that form a large component of household expenditure. Further, in September 2025, the cost of building homes changed significantly due to lower taxes on raw materials -Cement reduced from 28% to 18%, and bricks & stone, many materials were moved to a lower 5% slab. For the affordable housing segment, above reforms have dual benefit: it improves borrowers net monthly surplus (improving EMI affordability) and reduces construction input costs (moderating property prices in the EWS/LIG segment).
05 Indias Tech Stack
Making the previously un-bankable, bankable
The above sections establish the demand for affordable housing credit and the policy framework supporting it. The constraint that historically prevented that demand from converting into formal loan originations was not affordability or aspiration - it was assessment. A self-employed borrower with irregular cash flows, no formal pay slip, and no credit history was, in traditional underwriting, simply unassessable. Indias digital public infrastructure has altered this equation.
India did not build a digital economy - it built a digital civilisation infrastructure. For the first time, the Economic Survey 2025-26 formally attributed a portion of Indias potential growth upgrade to these digital infrastructure dividends - recognising them as Total Factor Productivity gains that allow the economy to extract more output from the same inputs by reducing transactional friction at scale.
a) DPI: The Bedrock of Credit Formalisation
Economy-wide adoption of Aadhaar, UPI and GSTN has reduced transaction and compliance costs. Settlement cycles have shortened, tax compliance improved, and firm entry/exit simplified - improving allocative efficiency by allowing capital to flow to more productive activities.
i) JAM Trinity: The Foundation of Indias Credit Formalisation Revolution
Indias JAM (Jan Dhan-Aadhaar-Mobile) trinity has fundamentally altered who can access formal credit. As per the Global Findex Database 2024, 89% of Indian adults now own a bank account - a transformation achieved in under a decade. While 14% of adults still have inactive accounts, existing account holders represent an immediate expansion opportunity for financial institutions committed to inclusion.
ii) Prime Minister Jan Dhan Yojna (PMJDY): Banking Access at Scale
Under the PMJDY, the governments aim is to ensure that every household in India has a bank account that they can access from anywhere and avail of all financial services such as savings and deposit accounts, remittances, credit and insurance affordably.
iii) Mobile Banking: Financial Inclusion in Rural India
In order to make financial services accessible to people who are unable to access physical bank branches, mobile banking has increased financial inclusion especially in rural areas. Mobile payments have seen number of transactions increase from 2,555 cr in FY21 to 22,267 cr in FY26. In value terms, the transactions grew from Rs92 lakh cr in FY21 to Rs455.6 lakh cr in during the same period.
b) UPI and Digital Payments: Bringing Scale & Speed
Deeper mobile penetration, improved connectivity and faster and cheaper data supported by Aadhaar and expanded bank account penetration have transformed India from a cash-dominated economy to a digital one. Total digital payments in the country grew significantly over the past few years. This accelerated trend underscores the technological innovations driving financial inclusion and accelerating digital economy. As per CRISIL Intelligence, UPI, an instant payment platform, has seen considerable uptake among retailers, with the number of transactions increasing to 24,161 cr (~86% of total digital transactions) in FY26 against 2,230 cr in FY21 (~51% of total digital transactions). This reflects faster UPI adoption over the years at a CAGR of 61%.
c) AI and ML: From Efficiency Gains to Underwriting Innovation
Artificial Intelligence (AI) and Machine Learning (ML) are rapidly transitioning from back-office productivity tools to strategic enablers across financial services. The Reserve Bank of Indias Framework for Responsible and Ethical Enablement of AI (FREE-AI), Committee notes that AI adoption in the sector is accelerating globally, with projected investments across banking, insurance, capital markets and payments expected to exceed USD 97 billion by 2027.
In India, the RBI also highlights that Generative AI could improve banking operations by up to 46%, underscoring its potential to materially enhance productivity, customer service and risk management. For affordable housing finance, the most consequential application is credit assessment of non-standard borrowers. ML models trained on digital transaction data, GST filing patterns, and cash flow proxies can evaluate the repayment capacity of self-employed and informally-salaried borrowers whom traditional scorecards decline by default. The result is a fundamentally expanded credit-eligible population - not by relaxing underwriting standards, but by improving information quality.
Indias digital infrastructure has not just improved financial access - it has created an entirely new category of assessable borrower. This combined with a rapidly maturing AI ecosystem, are creating conditions under which affordable housing finance can scale with discipline - reaching more borrowers, faster, with better risk outcomes and lower operating costs. The households that were previously excluded from formal credit not by ability to repay, but by inability to prove it, are now formally trackable.
06 Industry Landscape
Indias Affordable Housing Finance Industry-Structure & Growth
Indias housing finance market has grown into a large and structurally significant segment of the financial ecosystem. Total housing loan outstanding stood at ~Rs42 lakh cr as at end of Dec 2026, having expanded at a 14.5% CAGR between FY21 and FY25, and is projected to reach Rs56 lakh cr by FY28 by CRISIL.
Within this broader market, the affordable housing finance (AHF) segment - considered here as housing loans in the Rs5-40 lakh ticket size range - constitutes a large and structurally distinct opportunity. As of Q3 FY26, affordable housing loan outstanding stood at approximately Rs21 lakh cr, estimated to grow to Rs36 lakh cr by FY30, assuming a~12% CAGR. This growth reflects sustained end-user demand, improving affordability, and increasing penetration of formal credit. However, beneath this expansion lies a structurally segmented market, where affordable housing finance has emerged as a distinct and underpenetrated opportunity.
As discussed in the earlier sections Indias housing market presents unique dynamics - strong end-user demand coexisting with limited formal credit penetration. This gap is most visible in the affordable housing segment, where a large section of economically active households remain underserved by traditional lending channels.
a) Multiple Frameworks of Affordable Housing Finance
Affordable housing has been covered across multiple regulatory and policy frameworks in India, each tailored to its specific purpose. A few of them are captured below:
• PMAY-U 2.0 (2024): A dwelling unit with carpet area up to 60 sq. m in metropolitan cities (90 sq. m in non-metro areas) and total value not exceeding Rs45 lakh. Beneficiaries are classified as EWS (household income <Rs3 lakh/year), LIG (Rs3-6 lakh), and MIG (<Rs9 lakh).
• RBI - Priority Sector Lending (PSL): Defines affordable housing loans eligible for PSL classification, updated April 2025.
| Population centric criteria | Max Housing Loans | Max Property Cost |
| Centres with pop. > 50 lakh | 50 | 63 |
| Centres with pop. 10-50 lakh | 45 | 57 |
| Centres with pop. <10 lakh | 35 | 44 |
• GST Act, 2019: Preferential rates (1%) apply to units with value <Rs45 lakh and carpet area <60 sq. m (metro) / <90 sq. m (non-metro).
For the purposes of Industry landscape section, the affordable housing finance segment is considered as housing loans with ticket sizes between Rs5 lakh and t40 lakh — consistent with industry convention and reflecting the primary borrower segments served.
b) Ticket Size Distribution: ~85% of Volumes Remain Sub-Rs40L
Between FY21 and FY25, the high growth rate in loans above Rs40 lakh among ticket size categories can be attributed to premiumisation trends in Metropolitan and Tier I cities, increased supply of higher-value residential units, and strong participation from prime salaried and self-employed borrowers with established credit histories.
In terms of portfolio (AUM) composition as of Dec 2025, affordable housing loans (Rs5-40L) accounted for ~65% of total housing finance outstanding in volume terms and ~49% in value terms
Within the affordable housing segment, the share of number of loans in the Rs5-25 lakh range has moderated from 56% of total loan volumes in FY21 to 49% as of Dec25, while the contribution of the Rs25-40 lakh segment has increased from 10% to 16% over the same period. This evolution represents a natural and healthy premiumisation within the affordable housing market.
The shift in ticket sizes is primarily driven by structural factors, including sustained increases in residential property prices and construction costs across urban and semi-urban markets. At the same time, improved borrower eligibility, supported by consistent growth in per capita income, stronger household cash flows, and broader credit penetration, has enabled customers to access slightly larger loan amounts while maintaining
c) Inflation-Adjusted Ticket Size: Natural Progression & Expanded TAM
What appears to be a shift away from affordable housing is, in reality, affordable housing evolving with inflation
- and the addressable market is larger than it looks. Indias housing market has experienced steady inflation
over the last seven years. The Housing Price Index (HPI) has grown 1.3x and the Consumer Price Index (CPI) has grown 1.4x since FY19, naturally pushing property values - and therefore loan ticket sizes - upward.
Inflation Adjusted Ticket Size Segment:
| THEN — FY19 (Original) | NOW — Dec25 HPI Adjusted (1.3*) | NOW — Dec25 CPI Adjusted (1.4*) | |
| Rs5L | -- > |
Rs6.5L | Rs7.1L |
| Rs25L | --> | Rs32.4L | Rs35.3L |
| Rs40L | --> | Rs51.9L | Rs56.4L |
| Rs50L | --> | Rs64.8L | Rs70.5L |
This means the borrowers in Rs5L-25L bracket are organically moving into the Rs25-40L bracket representing a natural and benign ticket size expansion. Rs5-25L ticket size bracket does not represent the same reality of housing finance it did in 2019. A borrower purchasing the same home today simply needs a larger loan - not because they are moving upmarket, but because inflation has repriced the asset.
On the surface, the chart above shows the Rs5-25L segments share declining from 43% in Mar19 to just 28% in Dec25 - in reality, adjusted for Inflation, the segment has remained at ~40% consistently over this period. As the ticket sizes adjust to reflect inflation, the pool of eligible borrowers and transactions within the affordable segment (Rs5-25L)widens materially. The effective TAM is 37-40% of the market, compared to the 28% in real (unadjusted for inflation) lens, represents a significantly larger opportunity for disbursement growth.
d) Market sizing & Growth
The affordable housingfinance segment has demonstrated consistent growth, supported by sustained end-user demand, rising incomes, improving credit penetration, and expanding formal housing supply in cities including urban centres & its peripheries. Historically, the Rs5-40 lakh segment grew at ~12% CAGR between FY23 and FY25.
e) Housing Price Trends
The residential real estate markets have exhibited signs of increasing stability and maturity. Property prices across major urban centres have witnessed gradual and broad-based appreciation through FY26. The Reserve Bank of Indias Housing Price Index (HPI) has risen steadily from ~267.6 in Q4 FY19 to ~346.9 by Q3 FY26, reflecting a measured upcycle rather than sharp, speculative price movements. The trajectory indicates a healthier housing cycle, where price appreciation is anchored in underlying demand fundamentals - such as rising household incomes, improving employment conditions, and greater access to formal credit.
Importantly, the steady increase in property values has also led to a natural upward shift in loan ticket sizes, particularly within the affordable and mid-income segments, as borrowers increasingly aspire for larger or better-located homes. This evolution supports sustained growth in disbursements and loan books for lenders, while maintaining the core borrower profile and risk characteristics.
f) Structural Positioning of Lenders
A key feature of the housing finance landscape is the divergence in ticket-size at the time of sanction positioning across lender types. Over the years, the lender wise Average Ticket Size (ATS) has moved as below:
• Private banks had an ATS of Rs41.1 lakh - up from Rs32.7 lakh in FY21
• Public sector banks operated at an ATS of Rs35.8 lakh
• HFCs remained anchored at Rs24.6 lakh, squarely within the Rs5-40 lakh affordable segment
• NBFCs have moderated to ~Rs16 lakh
This divergence reflects a structural segmentation of the market: larger banks, driven by operational efficiencies and risk preferences, have progressively shifted toward higher ticket-size borrowers in metro markets. Specialised affordable housing finance companies (AHFCs), by contrast, have deepened their presence in the sub-Rs40 lakh space - serving assessable incomes including selfemployed borrowers, informal income households, and first-time homebuyers in who remain significantly underserved by mainstream lenders.
g) Banks Are Going Up-Market —Vacating the Affordable Segment
An analysis of the banking sectors housing loan portfolio over the past decade highlights a clear and sustained shift in ticket size distribution, with meaningful implications for the affordable housing segment.
Between FY17 and Dec25, the share of housing loans with ticket sizes below Rs50 lakh has steadily declined from ~80% to ~56% of total housing AUM. This indicates a gradual but consistent reallocation of bank capital away from the affordable and mass housing segments.
In contrast, the share of higher ticket loans (above Rs50 lakh) has expanded significantly over the same period, reflecting a structural tilt toward premium and mid-to- high income housing.
From a growth perspective, the overall banking sector housing AUM has grown at a healthy CAGR of ~17% during FY17 & Dec25. However, this growth has been uneven across segments:
• The sub-Rs50 lakh segment has grown at a relatively modest ~13% CAGR, indicating slower expansion in affordable housing finance by banks.
• The above Rs50 lakh segment has witnessed a much stronger ~25% CAGR, underscoring banks increasing focus on higher-value loans by banks.
As reflected in the RBI data above, the share of sub- Rs50 lakh loans in the overall banking systems housing loan AUM has declined from approximately 77% in FY2017 to 56% in FY2025, highlighting a clear shift in banks focus toward higher-ticket housing loans. To gain a more granular understanding, additional market data was analysed, which indicates that the banks share of affordable housing loans in the Rs5-40 lakh segment has declined from around 60% to 45% over the past five years.
This trend underscores a systemic premiumisation within the banking sector, with banks increasingly allocating capital toward larger-ticket and relatively lower-risk borrowers. As a result, the composition of housing finance within the banking system has gradually shifted toward higher-value segments, while the relative share of affordable housing loans has moderated over time. This creates a significant opportunity in market to cater to low- and middle-income customers through specialised underwriting capabilities, deeper on-ground distribution networks, and a stronger ability to assess informal and semi-formal income profiles. As banks continue to prioritize larger ticket loans, AHFCs are likely to play an increasingly critical role in driving credit penetration and supporting home ownership in the affordable segment.
07 The NITI Aayogs Diagnosis
Why Market Forces Alone Cannot Fill the Gap
The sections above establish the demand, policy, and competitive landscape, NITI Aayogs December 2025 report - A Comprehensive Framework to Promote Affordable Housing - provides the most authoritative diagnosis of why that demand remains systemically unmet. Prepared jointly by NITI Aayog, the Ministry of Housing and Urban Affairs, and the Department of Financial Services, the report identifies interlocking
FINDINGS. GROWTH SIGNALS. ONE CONCLUSION.
1. Builder-led affordable supply has reduced - but selfbuilt demand remains structurally intact:
The builder led supply-to-demand ratio for the affordable segment dropped to 0.36x in H1 2025, against 1.05x in 2019. According to The NITI Aayog report developer margins in the EWS/LIG segment are thin (10-12% versus 25-30% in luxury), and without policy intervention - FAR relaxation, land bank unlocking, single-window clearances, and the restoration of Section 80-IBA tax incentives etc. private participation in the segment will remain limited. The diagnosed supply crunch is primarily a developer-side constraint and does not affect the selfconstruction segment. Households seeking formal credit to build their own homes continue to represent one of the most resilient and steady demand pools in the sector. As these reforms take hold, each newly developed affordable unit entering the market creates an additional origination opportunity—on top of the already active and stable base of self-construction borrowers.
2. Land costs have made urban formal housing inaccessible:
A standard 30 sq.m. home costs Rs6-8 lakh in rural areas barriers across land, construction, income, credit access, and rental markets. Its core conclusion is unambiguous: neither government subsidy alone nor market forces alone can close Indias affordable housing gap. Formal credit - with appropriate underwriting innovation and digital infrastructure - is the mechanism that makes the gap bridgeable at scale. but nearly Rs25 lakh in metros - a fourfold increase - with land alone accounting for 63% of metro project costs versus 10% in rural areas. Land acquisition costs constitute 50-70% of total project costs in urban India, excluding 75-85% of urban households from formal housing markets.
The NITI Aayog report does not leave this as an open problem. It has proposed remedies are specific: zoning reforms with dedicated Affordable Housing Zones in city master plans (minimum 10% of all residential land reserved); TOD-linked affordable housing with FAR up to 8 near transit nodes; creation of government and railway land banks (Indian Railways alone holds ~460 sq. km of vacant land, defence authorities ~182 sq. km) to be leased for affordable housing development at nominal cost; and Transferable Development Rights (TDR) frameworks that improve project viability for developers entering the segment.
The geographic redistribution already underway - demand concentrating in peri-urban belts where land costs are lower and employment access remains viable - is itself a market signal for where origination opportunity is migrating.
3. Income growth has not kept pace with housing cost escalation - which makes mortgage credit indispensable
Average monthly household income rises from Rs20,000 in rural areas to Rs47,000 in metros - a 135% increase. Housing costs across the same geography have risen 300400%. The NITI Aayog report treats this gap as a condition that makes mortgage credit indispensable. Housing finance is bridging the gap - converting the difference between current income and required home value into a manageable EMI over 15-20 years.
The reports proposed interventions on the capital access side include enhanced credit guarantees for buyers (the CRGFTLIH limit is recommended to be raised from Rs20 lakh to Rs40 lakh), NHB-issued tax-free bonds under Section 54EC to lower the cost of funds for lenders serving EWS/LIG borrowers, lower interest rate financing through PSL-linked mechanisms, and stamp duty exemptions for PMAY-U 2.0 properties. Each of these measures is proposed to reduce the effective cost of homeownership for the borrowers - expanding the addressable pool.
4. Informal workers are excluded from formal credit - but that exclusion is changing.
A large proportion of EWS/LIG households are selfemployed or informally employed, with irregular incomes and no formal credit history, making them ineligible for bank loans even though they are the primary target group for affordable housing schemes. The NITI Aayog report acknowledges this explicitly - and recommends the adoption of Indian Banks Association-developed cash flow-based underwriting templates suited to informal income streams, along with alternative credit information models.
The report specifically calls for Account Aggregator- based cash flow analysis, bank statement analysis, and GST-linked income assessment as the tools to make informal incomes formally trackable. It is the underwriting innovation that affordable housing finance companies have been practising at the frontier for years. The government is now formalizing and endorsing this approach at the highest policy level.
5. Nearly 1 crore urban homes lie vacant - but the rental market offers no real alternative.
India has approximately 1 cr vacant urban homes, locked out of the rental market by low yields (2-3% of property value), archaic tenancy laws, and litigation risk. The dysfunctional rental market has a powerful and often under-appreciated implication for housing demand: it eliminates the rent vs. buy calculation for most households. When homes cannot be easily let out, owning is structurally superior to renting for households with even modest savings. Aspiration converts to purchase faster than in markets with functioning rental markets. Additionally, as policy reforms (Model Tenancy Act, RERA rental provisions) gradually unlock the vacancy overhang, the supply side will expand without new construction, improving affordability and borrower confidence further.
The Integrated Picture
What makes the NITI Aayog report notable is its ability to tackle both sides of the affordability equation at once. On the supply side, factors such as high land costs, shrinking developer margins, and regulatory hurdles explain the limited availability of formal affordable housing. On the demand side, income-price mismatches, restricted access to credit, and the prevalence of informal employment clarify why even existing units remain inaccessible to those who need them most. The failure of the rental market further intensifies the problem, effectively forcing homeownership as the only viable path for millions of households.
For each of these challenges, the report proposes specific, actionable interventions. It reflects a clear understanding within the government of this segment and its structural constraints, alongside a deliberate effort to build a policy framework spanning land reform, FAR liberalization, digital underwriting, enhanced credit guarantees, and rental market reform. Central to this approach is the expansiaon of formal housing credit to historically underserved households - identified as the key lever for bridging the affordability gap at scale. In that sense, the framework serves as the governments own validation of both the sectors purpose and its addressable market.
Ultimately, its neither the subsidies alone nor market forces in isolation that can resolve the issues. Instead, large-scale impact depends on systematically extending formal housing credit - supported by underwriting innovation, digital infrastructure, and policy backing - to underserved households. The barriers identified by NITI Aayog, therefore, define not just the challenge, but also the fundamental role and opportunity within the affordable housing finance sector.
08 The Long Runway
Housing Demand — The Opportunity Compounds Over Decades
India faces a structural housing deficit measured in crores of units alongside a mortgage market that remains deeply underpenetrated relative to both need and international benchmarks. This gap between housing need and housing ownership represents a multi-decade growth opportunity.
a) The Housing Deficit
Despite sustained demand, India continues to face a structural housing shortage, particularly in urban areas and within economically weaker and lower-income segments. The overall housing shortage is much higher than 6 cr (as per the Twelfth Five- Year Plan, 2012-2017), due to changing social and demographic patterns in India, such as nuclearization of families and rapid urbanisation. The housing shortage debate in India centres on methodology - not direction. Every credible analytical framework, from the governments own technical groups to international property consultants to NITI Aayogs December 2025 report, arrives at the same structural conclusion: Indias affordable housing supply is catastrophically misaligned with demand. The table below brings these estimates together for the first time:
| Source | Units Shortage Estimate | Scope |
| 12th FYP Technical Group (2012) | 1.9 cr units | Urban housing shortage |
| CII-Knight Frank (Dec 2024) | 3.1 cr units by 2030 | Urban housing shortage |
| Knight Frank / NAREDCO (Aug 2025) | 0.9 cr existing; 3.0 cr by 2030 | Urban housing shortage |
| FED Analysis (Current state: Niti Ayog) | 5.0-7.0 cr units | Total (urban + semi-urban) shortage |
| Viksit Bharat 2047 | 4.0+ cr units | Urban housing shortage |
| PMAY Housing for All targets |
3.0 cr units (1.0 cr urban, 2.0 cr rural) by 2029 |
Government target |
Estimated Housing shortage
| Source | No.of households (Crore) | Available Quality Houses (Crore) | Deficit (Crore) |
| Metro1 | 5 | 2-3 | 2-3 (40-60%) |
| Urban2 | 3.8 | 1.8-3 | 1.5-2 (40-50%) |
| Semi Urban3 | 4.8 | -3 |
1.5 (30-40%) |
| Total | 13.5 | 7-8 | 5-7 Cr |
1. Defined as Delhi, Mumbai, Chennai Kolkata Bangalore, Hyderabad, Ahmedabad and Pune
2. Defined as cities with population 1 lakhs as per Census 2011
3. Defined as other urban centres
These divergent estimates reflect varied methodologies and different reference periods, making direct comparison difficult. Government data emphasises sanctioned and completed stock, while private studies capture latent and future demand, often projecting a larger deficit. The
b) Viksit Bharat 2047: The 25-Year Commitment
Indias national vision of a developed economy by 2047 places urban housing at its core. The Viksit Bharat framework envisions GDP rising from $4.18 trillion (2025) to $30 trillion (2047), accompanied by an urban population share expanding 51% by 2047. Building floor space is projected to grow from 18 billion m2 (2023) to 37 billion m2 (2047) and 42 billion m2 (2070). This translates to massive urban infrastructure expansion - the government
Committee constituted by NITI Aayog concluded that the affordable segment remains significantly underserved, requiring specific government interventions. estimates India will need to construct 4.0+ cr additional urban housing units between 2025 and 2047, with total investment exceeding Rs50 lakh cr.
As per the report, the real estate sectors contribution to GDP is expected to rise from ~7% (2021) to ~13% by 2050 - a near-doubling that underscores the central role housing will play in Indias economic trajectory.
c) The Mortgage Penetration Gap: A Multi-Decade Opportunity
Indias mortgage-to-GDP ratio stands at just 11.2% as of FY25 - compared to 51% in the US, 82% in the UK, 35% in Malaysia, and 28% in China. This is not a gap of aspiration but of lack of formal credit access - which Indias digital infrastructure, policy architecture, and rising incomes are now closing at scale.
The World Banks cross-country analysis of mortgage market development establishes that housing finance is income-elastic - developing slowly at lower income levels but accelerating sharply as economies enter the upper- middle-income transition. Economies like China have historically seen household credit-to-GDP ratios expand driven by rising formal employment, urbanisation, and the emergence of a mortgage-eligible middle class.
09 Conclusion
The Foundation is Strong. The Runway is Long.
This analysis has traced a chain of causation - from the global macroeconomic environment through Indias structural momentum, through the housing industry and into the affordable housing segment. At each step, the evidence points in the same direction.
We are not at the beginning of this story, nor anywhere near the end. We are in the compounding phase - building the institution, the network, the data advantage, and the customer relationships that will define leadership in affordable housing finance as Indias housing moment unfolds over the next decade.
The conditions are aligned. Indias sovereign upgrade, fiscal discipline, monetary policy fully accommodative. Against that backdrop: mortgage-to-GDP at 11.2%, a housing shortage of 625 lakh units, 400+ lakh additional urban homes needed by 2047, and a middle class expanding by ~100 - 150 lakh households per year - vast, still largely untouched by formal housing credit.
The portfolio quality, disciplined underwriting, diversified liability franchise, and regulatory track record provide the institutional foundation. The opportunity provides the horizon. The work of connecting aspiring households to homes they can own is both commercially compelling and, for an economy of Indias size and ambition, genuinely important. We intend to do a great deal of it.
Our performance overview
Snapshot of FY26 and key updates
During FY26, HomeFirst successfully scaled operations across 13 States / UT, maintaining strong growth momentum. We achieved a significant milestone as our Assets Under Management (AUM) crossed Rs15,000 Crs, representing a 24.9% increase over FY25. Annual disbursements further recorded a 12.9% y-o-y growth. This performance was underpinned by the strategic expansion of our granular distribution network, robust liquidity management, and the seamless integration of technology across our operational framework. Our collections remained resilient, ensuring stable asset quality with Gross Stage 3 (GNPA) at 1.8% (compared to 1.7% in Mar25). These operational efficiencies translated into superior financial outcomes, including a best-inclass Return on Assets (RoA) of 3.9% and a Return on Equity (RoE) of 15.7% (Pre-money RoE at 16.8%). Net Profit witnessed a substantial increase of 41.4%, reaching Rs540.4 Crs.
In Apr25, the Company successfully executed its maiden Qualified Institutional Placement (QIP), raising Rs1,250 Crs. The offering saw strong participation from marquee institutional investors, including existing stakeholders who increased their positions, reaffirming confidence in our differentiated business model and governance standards. This capital infusion significantly strengthens our balance sheet by enhancing our Capital Adequacy Ratio (CRAR) and reducing leverage.
Further augmenting our financial profile, our longterm credit rating was upgraded to AA (Stable) by ICRA, India Ratings, and CARE. Together, the QIP and the rating upgrade provide a powerful platform to expand our footprint and build a large-scale housing finance franchise.
Let us delve into the foundational elements that shaped our growth story for FY26.
Distribution Network
We continue to pursue a contiguous branch expansion strategy, with a clear focus on addressing the significant opportunity in underserved affordable housing finance markets. Over the years, we have systematically expanded into newer districts across our 13 states and union territory, while simultaneously strengthening our presence within existing districts. This calibrated approach enables deeper market penetration, improved customer access, and stronger local franchise development. Our expansion is further supported by a differentiated business model, which facilitates sustainable market share gains and scalable growth across geographies.
As of Mar26, we had a network of 373 touch points, including 171 branches covering over 144 districts in 13 states and union territory in India. During the year, we have added 16 new physical branches, of which 9 branches were in our focus states, 5 in emerging states and 2 in other states. Our focus states (namely Maharashtra, Gujarat, Tamil Nadu, Karnataka, Andhra Pradesh and Telangana) continue to account for approximately 53% of the countrys affordable housing finance market (in terms of annual origination based on FY25 data) and our emerging states of Rajasthan, Madhya Pradesh and Uttar Pradesh account for approximately 22% of affordable housing finance market.
Our expansion strategy focuses on establishing a strong presence across large affordable housing markets spanning multiple tiers. We adopt a granular distribution approach, with calibrated expansion of branches and touchpoints aimed at driving market share gains while maintaining asset quality, improving productivity, and optimizing operating costs. Our contiguous expansion across regions is guided by a disciplined and data-driven evaluation of target markets, enabling us to identify areas with robust demand potential and deliver sustainable, well-balanced growth.
Contagious network expansion to cover large affordable housing finance markets
| State/ UT | Mar23 | Mar24 | Mar25 | Mar26 | ||||
| Branches | Districts | Branches | Districts | Branches | Districts | Branches | Districts | |
| Andhra Pradesh | 9 | 9 | 9 | 9 | 11 | 11 | 12 | 12 |
| Chhattisgarh | 3 | 4 | 4 | 5 | 4 | 5 | 4 | 5 |
| Haryana & NCR | 1 | 2 | 2 | 3 | 3 | 3 | 4 | 3 |
| Gujarat | 24 | 22 | 31 | 22 | 36 | 23 | 38 | 23 |
| Karnataka | 6 | 6 | 6 | 7 | 7 | 7 | 8 | 7 |
| Madhya Pradesh | 8 | 7 | 11 | 10 | 14 | 12 | 17 | 12 |
| Maharashtra | 19 | 17 | 22 | 19 | 26 | 19 | 30 | 20 |
| Rajasthan | 8 | 8 | 10 | 8 | 12 | 9 | 12 | 10 |
| Tamil Nadu | 22 | 24 | 23 | 25 | 24 | 25 | 25 | 25 |
| Telangana | 8 | 12 | 9 | 12 | 10 | 14 | 10 | 14 |
| Uttar Pradesh & Uttarakhand | 3 | 8 | 6 | 11 | 8 | 13 | 11 | 13 |
| Total | 111 | 119 | 133 | 131 | 155 | 141 | 171 | 144 |
Note: District count is basis total touchpoints in the respective state/ UT
Disbursements
The Company recorded annual disbursements of Rs5,423.6 Crs, reflecting a year-on-year growth of 12.9% compared to Rs4,805.3 Crs in FY25. This performance was supported by sustained monthly momentum, driven by a steadily expanding borrower base and increasing portfolio depth.
Our active customer base grew by 18.0% to 1,39,171 as of Mar26, highlighting the continued trust placed in us by our customers and the effectiveness of our growth initiatives. This progress is the result of a well-calibrated, comprehensive strategy focused on the disciplined expansion of our branch network into high-potential markets, the introduction of innovative and customercentric financial products, and the integration of modern technology platforms to enhance operational efficiency and deliver a superior customer experience.
Assets Under Management
Our Assets Under Management (AUM) reached a significant milestone during the year, crossing the Rs15,000 Crs mark to close at Rs15,877.7 Crs as of Mar26. This represents an impressive 24.9% y-o-y growth from Rs12,712.7 Crs in Mar25, underscoring our ability to consistently meet customer demand and consolidate our presence in focus markets. This achievement reflects the underlying strength of our business model and our commitment to serving the affordable housing segment. Looking forward, we remain focused on a dual-pronged growth strategy designed to fuel further expansion by increasing market share within our existing branch network and strategically extending our coverage through the addition of new branches.
| AUM in States (RsCrs) | FY21 | FY23 | FY26 | CAGR (FY23-26) | CAGR (FY21-26) |
| Gujarat | 1,582.4 | 2,343.2 | 4,531.3 | 24.6% | 23.4% |
| Maharashtra | 796.4 | 1,037.0 | 2,381.4 | 31.9% | 24.5% |
| Tamil Nadu | 461.4 | 988.0 | 1,733.0 | 20.6% | 30.3% |
| Madhya Pradesh | 181.9 | 368.4 | 1,628.6 | 64.1% | 55.0% |
| Telangana | 227.0 | 639.0 | 1,269.1 | 25.7% | 41.1% |
| Rajasthan | 226.7 | 409.8 | 1,032.3 | 36.1% | 35.4% |
| Uttar Pradesh & Uttarakhand | 121.4 | 361.3 | 988.2 | 39.9% | 52.1% |
| Karnataka | 375.9 | 538.6 | 957.3 | 21.1% | 20.6% |
| Andhra Pradesh | 79.3 | 322.0 | 873.4 | 39.5% | 61.6% |
| Chhattisgarh | 47.8 | 132.0 | 339.4 | 37.0% | 48.0% |
| Haryana & NCR | 40.9 | 58.7 | 143.7 | 34.8% | 28.6% |
| Total | 4,141.1 | 7,198.0 | 15,877.7 | 30.2% | 30.8% |
Product Metrics
We remain committed to serving all customer profiles throughout their home loan journey by offering a diverse range of products. We serve both salaried and self-employed customers. Salaried customers account for 68.3% of our AUM and self-employed customers account for 31.7% of AUM, as of Mar26. Our business focus continues to be on core home loan segment which contributes to 83.2% of our total AUM as of Mar26; with a strong presence in the core affordable housing finance segment, i.e. self-construction loans, as well as builder- led individual home loans and home resale options. We diligently monitor our risk profile and maintain minimal exposure to under-construction properties. As of Mar26, our Loan-to-Value (LTV) at the time of origination stands at 55.7%. Based on AUM, as of Mar26, more than 37% of AUM has LTV below 50% and 43% of AUM has LTV between 50% and 80%. Contribution from new-to-credit customers to our AUM, as of Mar26, is at 12.8% - the same has been on a declining trend over last decade.
Loan to Value (in %)
Credit Underwriting Process
Our underwriting framework is anchored in advanced data science and a centralized operating model, complemented by a nuanced understanding of local property markets and the expertise of highly skilled underwriters. This integrated approach enables accelerated capability building through high-volume exposure, while ensuring the organizational agility required to respond effectively to evolving market dynamics.
We have established a robust and well-governed credit approval system that promotes disciplined risk assessment and consistency in decision-making. This framework continues to support the maintenance of strong asset quality across our portfolio.
Key characteristics of our Home First underwriting process
| • Thorough due-diligence before onboarding connectors and other partners. | |
| • Quick response on generated leads. | |
| • Comprehensive screening of the customer profile, including understanding income sources and risks, property/residence/workspace verification. | |
| Initial Screening and Pre-Sanction Check | • Digital validation of leads through third-party databases including KYC. Filtering out low credit bureau score customers. |
| • In-built fraud detection tool to prevent onboarding of customers with a prior fraud history. | |
| • Detailed proposal is submitted by front-end team incorporating site photos/ videos and all relevant customer information/ documentation. | |
| • Geo-tagging of all the verifications to accurately detect and validate the location of the customers. | |
| • Data-science backed centralised underwriting. | |
| • Integrated CRM & Loan management System on cloud-based platform. | |
| Customer Credit Underwriting | • API integration with third party independent sources and usage of account aggregator to help in triangulation of income and proofs, submitted to front-end teams, done from a single dashboard. |
| • Banking analytical tools to transform large transaction data into instant actionable insights enabling precise credit decisions. | |
| • Proprietary Machine learning & customer scoring models built used for credit decision. | |
| • In-depth understanding of property types and land laws of the operating geographies. | |
| • Legal and technical assessment through third party vendors & internal team. | |
| Property Underwriting & disbursement process | • Geo-tagging of all properties. |
| • Online verification from the records of Department of Stamps and Registration / Encumbrance Certificate and latest search conducted to verify ownership history. This ensures complete legal compliance and safeguards against any future disputes. | |
| • Tiered collection system led by the same front-end team, ensuring strong sense of responsibility. | |
| Loan Collection and Monitoring | • Usage of analytical tools like bounce prediction to support ground team and focus on early delinquencies. |
| • Digital medium like automated calling & SMS/ WhatsApp messages to enhance collection efforts. | |
| • Tracking instalment collection status on real time basis. | |
| • Convenient omni-channel payment options via Card, UPI, Net banking, Customer App etc. |
Asset Quality
We have set up a robust collections management system wherein approximately 98% of our collections during FY26 were non-cash based, which eases stress on monitoring financial transactions and reduces our cash management risk. As of Mar26, 97%+ of our customers are registered for an automated debit facility. We track the status of instalments collected through a collection module in our system. We employ a structured collection process wherein we remind our customers of their payment schedules and to maintain adequate balance in their account on the due date, through automated calls and text messages. We perform predictive analytics to predict the probability of bounce and help us initiate appropriate action to mitigate risks. Our collections process is completely managed by our branch teams. Half of our front-end teams incentives are dependent on collections.
We initiate recovery action immediately after a customer defaults in monthly payment and the severity of our efforts increase as the number of days past due increase. At one day past due, our front-end teams call customers and visit them to understand reasons for the default and for recovery of the dues. At 30 days past due, while our employees continue to engage with the customer, we send them a default notice. At 60 days past due, we send a loan recall/ Pre-SARFAESI letter and our employees reiterate the repercussions of loan default to the customer. Thereafter, we seek to resolve cases by initiating legal action through SARFAESI at 90 days past due.
Apart from customer selection and strong underwriting, our focused approach on collections has helped us in sustaining a stable asset quality and delivering low credit cost. Our tiered collection strategy, led by our front-end team, prioritizes the containment of early delinquencies, which remains integral to maintaining consistent collection efficiency and strong asset quality.
FY26 was marked by macroeconomic headwinds, particularly stemming from US tariff hikes that impacted key export-oriented markets such as Chennai, Coimbatore, and Tirupur. We had an enhanced collections focus on these locations ensuring that the overall impact to the portfolio was well within the acceptable limits. We also went careful on our new exposure into these markets. This early and calibrated response enabled us to effectively navigate localized disruptions, safeguarding the overall portfolio and maintaining stable asset quality throughout the year.
We have maintained a strong emphasis on early bucket collections, ensuring consistent focus in this area. Additionally, we provide convenient payment options for our customers, including app-based payments and remote payment links. These enhancements simplify the payment process, further contributing to the strength of our collections, initiating legal action through SARFAESI at 90 days past due.
Our Gross Non-Performing Assets (GNPA) ratio remains stable at 1.8% as of Mar26. Furthermore, our Stage-3 Total Provision Coverage Ratio is 44.9% as of Mar26, compared to 46.6% as of Mar25.
Our analysis of Strengths and weaknesses helps us identify and manage our business risks in a better manner.
Strengths
| • Deep understanding of customer segment, transparent loan process and documentation - leading to customer trust and loyalty. |
| • Distribution reach driven by curated and contagious branch expansion and granular sourcing model driven by connectors ensuring deep penetration across India covering >80% of affordable housing finance market. |
| • Highly trained, experienced, and motivated front-end as well as support team. |
| • Data-science backed centralised underwriting brings in quality, standardisation, and agility. |
| • Robust and tiered collection management system led by front-end teams. |
| • Seamlessly integrating technology across the business process and flows to ensure operating efficiency and service quality. |
| • Robust risk management framework coupled with strong collection process and culture. |
| • Strong balance sheet with strong capital base and diversified funding base. |
| • Experienced management team and Board to ensure execution and high governance standards. |
Weaknesses
| • Sensitive to changing interest rates and market conditions. |
| • Limited brand recognition compared to banks. |
Opportunities
| • Sustained government focus on addressing shortage of housing in the country through various welfare schemes like PMAY. |
| • Strong growth potential in underlying affordable housing finance market driven by factors like continued macro drivers, scope to increase credit penetration in India, government initiatives towards improving socio-economic landscape, increasing availability of credit, conducive regulatory and policy framework. |
| • Market share gain at existing locations. |
| • Deepening network into existing geographies, expansion into new geographies. |
Threats
| • Competitive intensity from time to time. |
| • Any adverse movement in the industry / macroeconomic environment. |
| • Economic downturns and natural disasters affecting portfolio quality. |
Risk Management
At Home First, risk management is a continuous and dynamic process focused on identifying, assessing, quantifying, and mitigating risks to support informed decision-making and sustainable business growth. The objective is to strengthen long-term financial resilience through proactive management of both financial and non-financial risks.
Key Focus Areas
• Ensuring compliance with regulatory and prudential norms prescribed by regulators and the Board.
• Identifying key business risks and establishing robust frameworks for their measurement and quantification.
• Periodically reviewing and strengthening internal controls and recommending appropriate risk mitigants.
• Monitoring adherence to Board-approved Risk Appetite limits across key risk parameters.
• Identifying and assessing emerging risks arising from regulatory, macroeconomic, and industry developments.
The Company is exposed to various risks inherent in financial services, including Credit, Market, Liquidity, Interest Rate, and Operational Risks (including IT-related risks). In addition, non-financial risks such as Reputational, Compliance, ESG, and Cybersecurity risks are actively managed.
An independent risk governance framework is in place to ensure segregation of responsibilities and independence in risk measurement, monitoring, and control functions. This framework is aligned with regulatory expectations and is supported by key processes such as the Risk Appetite Framework, Stress Testing, Early Warning Signals (EWS), and the Internal Capital Adequacy Assessment Process (ICAAP).
These frameworks are periodically reviewed and strengthened to ensure continued relevance and effectiveness. Risk exposures and mitigation actions are regularly reviewed by Management Committees and the Risk Management Committee (RMC), which oversees the overall risk profile of the Company.
Risk Governance & Risk Management Framework
Home First adheres to the highest standards of corporate governance, which reflect the core values of fairness, accountability, and sustainability. The Board provides strategic guidance while ensuring oversight and compliance. Its composition—diverse and inclusive—strengthens objectivity and transparent decision-making, with Independent Directors playing a pivotal role.
Risk oversight is conducted through regular reviews by the Risk Management Committee (RMC) and other management- level committees. These forums ensure alignment with the companys risk strategy and regulatory standards.
The Risk Management Committee periodically reviews key risks and related policies to ensure alignment with strategic growth plans. Sub-committees of the Board—ALCO, Risk Management Committee, and IT Strategy Committee—support risk monitoring. The Audit Committee oversees adherence to these frameworks and evaluates their adequacy in managing evolving risks.
Risk Appetite (RA)
Risk Appetite represents the level and type of risk the organization is willing to accept in pursuit of its business goals. It is defined within the companys risk-bearing capacity and strategic vision.
At Home First, the Risk Appetite Framework outlines limits for key risk categories, supported by both quantitative and qualitative parameters, and aligns them with overall business strategy. These thresholds are monitored by the Risk team and presented to management committees and RMC to ensure timely action, as and when required.
Early Warning Signals (EWS)
Home First has instituted an EWS framework to identify early signs of potential NPAs or fraud. It leverages data such as borrower profiles, credit bureau reports, product types, collateral details, and customer behaviour patterns to categorize risk and pre-empt adverse outcomes.
Internal Capital Adequacy Assessment Process (ICAAP)
As a Middle Layer NBFC under RBI classification, Home First is required to implement ICAAP. The ICAAP framework assesses capital adequacy in relation to the companys risk profile.
Home Firsts ICAAP Policy identifies material risks not captured by regulatory capital requirements and incorporates stress testing, scenario analysis, and projected financials.
Senior management—including the MD & CEO, Dy-CEO, CBO, CFO, CHRO, and CRO—regularly evaluates projected financials including capital position after considering critical business and macroeconomic success factors and ensures that the Company is adequately capitalized to meet its business plans.
Though submitted annually, ICAAP is a continuous process involving dynamic reassessment. The outcomes are first presented to the RMC, then approved by the Board before being submitted to the regulator. An independent review by third party is also conducted annually.
Stress Testing
Home First conducts stress tests to evaluate the potential impact of severe but plausible adverse conditions. The updated stress test policy defines scenarios, tolerance thresholds, mitigation strategies, and reporting protocols across Credit, Concentration, Liquidity, and Interest Rate Risks.
Emerging Risks
Emerging risks are newly developing or rapidly evolving threats that may have a significant impact on the financial industry but are often difficult to quantify due to limited historical data. These risks may arise from technological disruption (e.g., cyber threats, AI misuse), climate change, evolving regulatory landscapes, or geopolitical tensions. In the financial sector, proactively identifying and assessing such risks is crucial for resilience and long-term sustainability.
At Home First, a relatively flat organization structure with agile risk governance practices helps effectively anticipate and prepare for the impact of emerging risks by fostering faster decision-making, improved communication, and a more responsive approach to change.
Risk & Crisis Management
Crisis management encompasses preparation, response, and recovery from significant disruptions. At Home First, crisis preparedness operates at three levels:
| Operational | Business Strategy | Reputation Management |
| • Annual IT risk assessments and IS audits by CERT-In empanelled auditors. | • Monitoring macroeconomic and regulatory trends and aligning strategic responses. | • Support from a professional PR team and digital/social media monitoring tools. |
| • Evaluation of governance, cybersecurity, BCP, and third- party support. | • Assessing customer/product behaviour trends and competitive positioning. | • Zero-tolerance policies on workplace discrimination and compliance breaches. |
| • Well-defined Business Continuity and Disaster Recovery Policies with RTO and RPO targets. | • Grievance redressal with an escalation matrix. | |
| • Active Stakeholder Relationship Committee oversight. |
Risk Categories and Mitigation Strategies
The following table outlines key risks and mitigation strategies across Home Firsts operations:
| Risk Type | Description | Mitigation Measures |
| Credit Risk | Risk of default or deterioration in creditworthiness of borrowers or counterparties. | • Periodic evaluation of Board approved Credit Policy adherence and asset quality parameters by Credit Committee and Audit Committee. |
| • Board-approved Credit Policy reviewed annually to ensure regulatory compliance as well as relevance and effectiveness with respect to business strategy, underlying, market scenario. | ||
| • Centralized credit approvals, risk-based pricing, and exposure limits. | ||
| • Technical/legal due diligence on collateral. | ||
| • Independent audits and continuous training of credit personnel. | ||
| Market Risk | Losses from adverse movements in market prices or interest rates. | • Investments guided by a detailed policy focusing on high-quality instruments with strict control in terms of tenure, product, ratings, limits, and authorisation. |
| • Regular assessment of investments and portfolio with quarterly reporting to ALCO. | ||
| Operational Risk | Losses due to failed internal processes, systems, or external events. | • The Board approved Operational risk management policy enlists the processes and controls for monitoring people, systems, and processes. |
| • Comprehensive system of internal controls, systems, and procedures to monitor transactions, employee rotations, contingency planning, insurance cover, document storage, retrieval arrangements and maintenance of backup procedures to minimize operational risks. | ||
| • Independent process audits by external auditors to ensure compliance and effectiveness in unbiased manner. Outcome of such audit, along with actions taken are regular periodically presented to the Audit Committee. | ||
| Liquidity & Interest Rate Risk | Inability to meet obligations without adverse financial effects. | • Board approved Asset-Liability Management Policy covering liquidity forecasting and gap analysis, funding source diversification as well as maintaining strong capital adequacy. |
| • Prudent ALM practices to ensure positive ALM flows across all buckets. Stress testing, liquidity buffers, and positive ALM flows maintained. | ||
| • Quarterly monitoring of liquidity ratios, including LCR | ||
| • Robust internal control and audit process to ensure compliance and effectiveness of the policy/ measures. | ||
| Compliance & Regulatory Risk | Failure to comply with legal or regulatory obligations. | • Robust compliance framework monitored by senior management through compliance tracker and reporting timelines with robust access- control and log tracking for server security. |
| • Regulatory updates closely tracked and integrated. | ||
| • Strong and agile IT framework to ensure low downtime and security risk with regular employee trainings and audit (once in two years to identify upgrade/ change requirements) ensuring effectiveness of the IT infrastructure. | ||
| • Internal control and audit framework ensures adherence to measure/ framework. | ||
| Reputational Risk | Damage due to adverse public perception or regulatory scrutiny. | • Governance framework with focus on applicable regulations and transparent stakeholder communication mechanisms in place which is complemented by regular training and awareness workshops. |
| • Tracking Reputation risk related parameters, including Digital & Social Media Monitoring. | ||
| • Customer grievance redressal policy with robust redressal mechanism | ||
| • Dedicated investor relations team and adherence to Regulatory disclosures | ||
| IT, Cybersecurity & Information Security Risks | Information technology risk is the risk arising on account of inadequacies or failure of technical infrastructure or IT systems which can have an adverse impact on the availability, integrity, accessibility and security of the data and the IT infrastructure. | • HomeFirst has an IT Policy prepared as per NHB and RBI guidelines, which sets out processes and controls that are required to be maintained in relation to the IT systems. The IT Policy is amended regularly. |
| • Further we have an IT Strategy Committee of the Board. The main responsibility of this Committee is to assess the IT systems of the Company and gauge the vulnerability of the system to various risks and its mitigants. | ||
| Cyber Security Risk means the risk of cyber-attacks on Home Firsts systems through hacking, phishing, ransomware and other means, resulting in disruption of our services or theft or leak of sensitive internal data or customer information | ||
| • The Company has adequate codes/policies to ensure that there is no breach in the privacy of the information of the customers. | ||
| • End Point security software and Antivirus software in all laptops. | ||
| • Robust access-control and log tracking for server security. | ||
| Information Security refers to protecting sensitive information and ensuring the use of information only by legitimate users with proper authorisation. The Risk of information getting compromised or being accessed without proper authorisation exposes the organization to Information Security Risk | ||
| • To ensure IT security, performance stability and flexibility, Home First has a well-established IT infrastructure in place. The loan processing applications of the company are built on Salesforce.com which is a globally recognized platform with low downtime and low security risk. | ||
| • Further, we conduct an IT audit once every two years to determine issues and process level gaps, if any. | ||
| • Training is provided to existing and new employees on IT policies, procedures and code of conduct | ||
| ESG Risk | Risks stemming from environmental, social, or governance issues. | • Strong framework with Board-approved ESG Policy and dedicated execution team supervised by senior management. |
| • Commitment to sustainability through ongoing reporting and stakeholder engagement. | ||
| • Regular publication of Business Sustainability and Responsibility Report ("BRSR") with transparent disclosures | ||
| • Negative list/exclusion for restricting funding to inappropriate property/development locations which may either lead to loss of life and/or deterioration in the quality of life in nearby habitats. |
Our Financial Performance
| Particulars (RsCrs) | FY26 | FY25 | YoY % |
| Interest Income on term loans | 1,573.4 | 1,280.2 | 22.9% |
| Net gain on DA | 112.2 | 91.2 | 22.9% |
| Non-interest income | 237.1 | 167.8 | 41.3% |
| Total Income | 1,922.7 | 1,539.2 | 24.9% |
| Interest on borrowings | 789.6 | 713.4 | 10.7% |
| Net Interest Income | 783.8 | 566.8 | 38.3% |
| Net Total Income | 1,133.1 | 825.8 | 37.2% |
| Operating Expenses | 368.4 | 295.4 | 24.7% |
| Credit Cost | 56.9 | 28.8 | 97.7% |
| Profit before tax | 707.8 | 501.6 | 41.1% |
| Tax expense | 167.4 | 119.5 | 40.0% |
| Profit after tax | 540.4 | 382.1 | 41.4% |
| Basic EPS | 52.3 | 42.8 | |
| Diluted EPS | 51.6 | 42.1 |
Key Financial Ratios
| Particulars | FY26 | FY25 | YoY % |
| Profit after tax on average total assets (ROA) | 3.9% | 3.5% | + 40 bps |
| Leverage (Average total assets/average Equity or average Net-worth) | 4.0 | 4.7 | - 70 bps |
| Profit after tax on average equity or average Net-worth (ROE) | 15.7% | 16.5% | - 80 bps |
| Cost to Income Ratio (Operating Expenses / Net Total Income) | 32.5% | 35.8% | - 330 bps |
| Operating Expenses / Average total assets | 2.7% | 2.7% | No Change |
| Debt to equity ratio | 2.4 | 3.8 | - 140 bps |
Total Income
Our total income increased by 24.9% to Rs1,922.7 Crs for FY26 from Rs 1,539.2 Crs for FY25, primarily due to increase in interest income on term loans - Rs1,573.4 Crs for FY26 (up 22.9.% from Rs 1,280.2 Crs for FY25). Interest income on term loan is driven by growth in our Principal outstanding - 23.4% for FY26. Net Interest Income increased by 38.3% to Rs783.8 Crs from Rs566.8 Crs for FY25, approximately 24.7% was driven by book growth and ~13.5% due to capital infusion through our QIP, which resulted in savings in interest expense. Net gain on DA is linked to higher volumes of DA transaction during the year - Rs838.4 Crs during FY26 (up 18.9% from Rs705.3 Crs for FY25). As of Mar26, total DA as a percentage of AUM was at 13.2% (Mar25: 12.9%). Our non-interest income also witnessed a significant 41.3% growth. This was largely due to increase in treasury related income to Rs107.7 Crs (up 25.1% from Rs86.1 Crs for FY25) on account of higher cash balance in Q1 due to QIP and fee and commission income to Rs82.7 Crs (up 82.7% from Rs45.3 Crs for FY25), reflecting the scaling up and full-year benefits of our corporate agency business, which began accruing insurance commission income from Aug24.
Operating Expenses
We continue to reap the benefits of our technology-driven, customised business flows which are complemented by our unique people strategy to ensure high productivity and thus, low cost. Despite considerable expansion in our operations - branch count (171 as of Mar26 vs. 155 as of Mar25) and employee count (1,855 as of Mar26 vs. 1,634 as of Mar25), we maintained our high productivity ratios with disbursement per employee and branch for FY26 at Rs3.1 Crs and Rs33.3 Crs respectively, in-line with FY25 - Rs3.3 Crs and Rs33.4 Crs respectively. Consequently, our opex-to-average total assets for FY26 was at 2.7% (FY25: 2.7%).
Profit After Tax
We delivered an exceptional financial performance in FY26, characterized by the successful scaling of operations and consistent asset quality. Our ability to effectively utilize operating leverage, complemented by the strategic capital infusion from the QIP, resulted in a remarkable 41.4% growth in Profit After Tax (PAT). PAT rose to Rs540.4 Crs for FY26, from Rs382.1 Crs in FY25. Reflecting this strengthened capital base, our Return on Equity (RoE) for FY26 stood at 15.7% (Pre-money RoE at 16.8%) compared to 16.5% in FY25.
Spread on Loans
The Company maintained healthy margins during the year, with spreads for FY26 standing at 5.3% (excluding co-lending), compared to 5.2% in FY25. During the period, the portfolio yield stabilized at 13.4% from 13.6% in FY25. While this was partially influenced by a 10 bps reduction in the Prime Lending Rate (PLR) in Jan26, the yield also reflected broader movements in the portfolio mix and market pricing dynamics. This was effectively offset by a notable improvement in our Cost of Borrowing (CoB), which decreased by 30 bps to 8.1% in FY26 from 8.4% in FY25. This reduction in CoB was primarily driven by our diversified borrowing mix, timely interest rate resets, and securing competitive marginal costs on fresh borrowings. Our robust financial profile continues to play a vital role in navigating interest rate cycles and stabilizing our overall borrowing costs.
Resource Mobilisation Shareholders Funds
As of Mar26, our Shareholders Funds stood at f4,356.5 Crs. This robust growth was driven by a steady accumulation of retained earnings and the successful execution of our maiden Qualified Institutional Placement (QIP) in Apr25.
| Particulars | (f Crs) |
| Opening Equity as on Mar25 | 2,521.3 |
| Add: Share application money received during the year | 0.1 |
| Add: Shares issued during the year - represents increase on account of face value for the shares allotted pursuant to ESOPs exercised | 0.3 |
| Add: Increase in securities premium on account of premium received on allotment of shares pursuant to ESOPs exercised | 86.1 |
| Add: Shares issued during the year - represents increase on account of face value for the shares allotted pursuant to Qualified Institutions Placement | 2.6 |
| Add: Increase in securities premium on account of premium received on allotment of shares pursuant to Qualified Institutions Placement (net off Share issue expenses) | 1,228.0 |
| Add: Statutory Reserve transfer for the period | 108.7 |
| Add: Increase in retained earnings (net off transfer to statutory reserve) | 393.7 |
| Add: Option valuation linked credit | 16.4 |
| Add: Other Comprehensive Income | -0.7 |
| Closing Equity as on Mar26 | f 4,356.5 |
ESOP allotment
In alignment with our philosophy of inclusive growth, we actively enable our employees to participate in HomeFirsts success through our ESOP schemes. During FY26, the Company issued and allotted 13,85,880 equity shares to eligible employees upon the exercise of their vested stock options under its ESOP plans. Furthermore, to continually incentivize and retain key talent, 9,75,000 new options were granted during the year under the HomeFirst ESOP Scheme 2021 and ESOP Scheme 2024.
QIP
In Apr25, the Company successfully executed its maiden Qualified Institutional Placement (QIP), raising Rs1,250 Crs through the issuance of 1,28,86,597 equity shares. This strategic capital raise saw strong participation from marquee institutional investors, reflecting their continued confidence in our business model and significantly strengthening our capital base to support long-term growth objectives.
Strong Capital position with healthy Capital to Risk-Weighted Assets Ratio
The company, as of Mar26, has capital adequacy ratio of 44.1% with Tier-I at 43.8%. The capital infusion significantly strengthens our balance sheet by enhancing our Capital Adequacy Ratio (CRAR).
The table below outlines our capital-to-risk-weighted assets ratios for the specified periods.
| Particulars | Mar26 | Mar25 |
| CRAR (%) | 44.1% | 32.8% |
| CRAR - Tier I capital (%) | 43.8% | 32.4% |
| CRAR - Tier II capital (%) | 0.3% | 0.4% |
Borrowings
As we continue to scale up our operations, we aim to further diversify our borrowing sources across multiple pools of capital. The companys on-book borrowings stood at Rs10,590.0 Crs as of Mar26, compared to Rs9,550.7 Crs as of Mar25.
During the year, the company successfully raised
Total Borrowings (RsCrs)
Includes Direct Assignment & Co-Lending
Rs4,788.6 Crs in funding (other than equity). Our liability management strategy emphasizes prudent diversification across 31 lending partnerships, with a strong focus on securing long-term borrowings at competitive rates.
During FY26, the Company has not issued any Commercial Paper or any Short-Term Instrument. Accordingly, the Companys Commercial Paper outstanding was NIL as at Mar26.
Direct Assignment
During FY26, purchase consideration of f838.4 Crs was received through direct assignments, leading to the de-recognition of the corresponding assets in the companys books. As of Mar26, the total portfolio includes Rs2,100.6 Crs under direct assignment, up from f 1,636.5 Crs in Mar25.
Co-lending
We have co-lending partnerships with Central Bank of India, Union Bank of India, Axis Bank, South Indian Bank and Jammu & Kashmir Bank During FY26, we successfully disbursed loans amounting to f307.4 Crs under co-lending contributing to 3.7% of our AUM as on Mar26. Our strategy includes expanding our co-lending portfolio over the medium term. We believe that co-lending offers a distinctive advantage by combining the banks access to low-cost funds with the capability of NBFCs (including HFCs) to efficiently source retail customers and manage them, including collections. Our goal is to expand co-lending transactions over the medium term.
Healthy Asset-Liability Position
HomeFirst has a disciplined approach to asset liability management (ALM). The Company carefully monitors the behavioural and contractual maturity periods of our assets and liabilities and classify them under their respective maturity buckets based on estimates and assumptions which considers relevant behavioural pattern as per historical data. As of Mar26, the Company has positive ALM position on a cumulative basis across all buckets.
Credit Ratings
We achieved a significant milestone during the year with our long-term credit rating being upgraded to AA (Stable) by ICRA, India Ratings & Research, and CARE Ratings. This upgrade serves as a strong endorsement of our stable asset quality, prudent risk management, and strengthened balance sheet.
| Rating Agency | Instrument | FY24 | FY25 | FY26 |
| ICRA | Term Loans and NCD | AA- (Stable) | AA- (Stable) | AA (Stable)* |
| Commercial Paper | A1 + | A1 + | A1 + | |
| India Ratings & Research | Term Loans and NCD | AA- (Positive) | AA- (Positive) | AA (Stable)** |
| Commercial Paper | A1 + | A1 + | A1 + | |
| CARE Ratings | Long-term Bank Facilities | AA- (Stable) | AA- (Stable) | AA (Stable)*** |
*credit rating upgraded to "AA (Stable)" from "AA- (Stable)" w.e.f. May 28, 2025 **credit rating upgraded to "AA (Stable)"from "AA- (Positive)" w.e.f. June 04, 2025 ***credit rating upgraded to "AA (Stable)" from "AA- (Stable)" w.e.f. June 10, 2025
Human Resources
Our human resource strategy remains a key pillar of our execution strength, enabling us to maintain high productivity and deliver optimized operating costs. To support our continued network expansion and business growth, we strategically augmented our talent pool during the year, with our total employee strength increasing to 1,855 as of Mar26, up from 1,634 in Mar25. We are deeply committed to fostering an environment that supports the holistic growth and development of our people. Beyond acquiring the right talent, we invest heavily in comprehensive training programs covering technical capabilities, soft skills, and leadership development. By offering attractive compensation, clear career progression opportunities, and cultivating a healthy, inclusive culture, we continue to drive strong employee retention. Our commitment to employee welfare is further reinforced through robust frameworks, including our Human Rights Policy, Equal Opportunity Policy, and Parental Leave Policy.
For further details on our training programs, employee benefits, and engagement initiatives, please refer to the Human Capital Chapter on page 89.
ESG
Environmental, Social, and Governance (ESG) principles are integral to our operational framework, evolving beyond mere compliance to become a fundamental business imperative. HomeFirst continues to position itself as an industry leader, demonstrating transparency in governance through comprehensive disclosures, green initiatives, and the end-to-end digitalization of processes. We remain deeply committed to creating a meaningful socio-economic impact for underprivileged and vulnerable communities, contributing to the development of a resilient and inclusive Indian economy. Guided by the Boards CSR Committee and aligned with our CSR Policy, our targeted interventions span critical focus areas, including skill development, employment generation, childrens education, school infrastructure enhancement, and healthcare.
Our sustained efforts in driving sustainable practices and fostering a dynamic workplace continue to earn recognition from leading global agencies. We maintained a strong S&P Global ESG Score of 46. Furthermore, during FY26, our Morningstar Sustainalytics ESG Risk score improved significantly to 13.6 (down from 16.2 in the previous year), reinforcing our Low Risk rating and maintaining our best-in-class standing among BFSI peers. This continued recognition underscores HomeFirsts unwavering commitment to sustainability, equitable growth, and exemplary corporate governance.
For further details on our initiatives, please refer to the Sustainability Report starting on page 47.
Internal Control Systems and Internal Audit
HomeFirst has a Risk-Based Internal Audit (RBIA) Policy in place. The Company has a Head of Internal Audit and is assisted by Joint Internal Auditors viz, M/s BDO India LLP, M/s P Chandrashekharan LLP and M/s Kirtane & Pandit LLP to conduct HO Process audits and Branch Audits.
The Internal Audit plan is derived from the RBIA framework, which is presented to the Audit Committee for their approval. Process and Branch audits are conducted to verify adherence to the Board approved policies and processes. Audit Findings are discussed with the Management and are reviewed by the Audit Committee of the Board at regular intervals.
The Company has an adequate internal Control System to ensure adherence to the companys policies and procedures, compliance with applicable laws and regulations, to ensure that management information and financial reporting are correct, reliable, and complete, to enable the detection and prevention of fraud and errors and to safeguard the company assets against loss from unauthorised use or disposition, amongst others. Further, the internal control system is commensurate with the size of the business as well as the industry in which the Company operates. The Company has appointed Internal Auditors to ensure compliance with the companys policies and procedures and compliance with applicable laws and regulations. Also, the Statutory Auditors independently evaluates the internal financial controls with reference to financial statements and certifies their adequacy and effectiveness in the Audit Report. The Audit Committee of the Board reviews the performance of the internal audit, the adequacy of the internal control systems and compliance with regulatory guidelines. The Audit Committee also provides necessary oversight, gives recommendations, and monitors the implementation of such recommendations.
Outlook
HomeFirst is well positioned to benefit from the strong structural demand in Indias affordable housing finance market, driven by the aspiring middle-income segment. Over the past sixteen years, the Company has built a differentiated business model anchored in a granular sourcing network and a centralized, data-driven underwriting framework.
Supported by deep technology integration and a strong on-ground team, the Company has developed efficient and scalable operating processes while maintaining credit discipline. These capabilities continue to drive sustainable growth and operational efficiency.
The Company remains focused on strengthening its market position with a clear ambition: "Fastest Provider of Home Finance for the Aspiring Middle Class, delivered with Ease and Transparency."
Cautionary Statement
This document includes forward-looking statements regarding anticipated future events, as well as the Companys financial and operational results. These statements inherently involve assumptions and are subject to risks and uncertainties. There is a considerable likelihood that these assumptions, projections, or forwardlooking statements may not be accurate. Readers are advised not to place undue reliance on such statements, as various factors could lead to significant deviations between the assumptions and actual outcomes or events.
The Company does not undertake any obligation to publicly update, modify, or revise forward-looking statements considering subsequent developments.
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