Non-bank lenders’ home loan growth is set to slow down in FY26, according to a recent Crisil report. This deceleration stems from aggressive competition by state-run banks in the market. The shift highlights a changing landscape in India’s lending sector.
Assets under management for non-bank lenders are projected to grow by 12-13 percent. This marks a decline from the 14 percent growth seen in the previous fiscal year. Despite several positive factors, the slowdown is becoming evident.
Intense competition from banks continues to challenge non-bank lenders. Public sector banks have notably increased their market presence. They have surpassed prime-focused housing finance companies in recent periods.
Subha Sri Narayanan, a director at Crisil, emphasized the competitive pricing strategies. Banks have shown strong growth in lower-interest-rate home loans. The share of loans with sub-9 percent interest rates has risen significantly.
This pricing competition has led to increased customer churn for many large HFCs. Balance transfer cases are becoming more common as borrowers seek better deals. The trend underscores the pressure on non-bank lenders to retain clients.
Home loans represent the largest segment for non-bank lenders’ mortgage assets. They contribute 59 percent of the total portfolio. This makes the slowdown particularly impactful for their overall performance.
Some lenders have raised concerns about irrational rates offered by competitors. State-run lenders are often cited in these discussions. These aggressive tactics are linked to the slower home loan growth observed.
Structural drivers for the home loan segment remain strong. Low mortgage penetration and rising urbanization support demand. Affordability indicators are also favorable for borrowers.
Disposable incomes are outpacing increases in house prices. Lower interest rates further enhance affordability. These factors should ideally boost home loan uptake.
Recent policy changes have also played a role. Revisions in income tax slabs and GST rationalization emerged as major influences. They contribute to the supportive environment for home loans.
Beyond competition, moderation in residential real estate sales poses another challenge. Growth in value terms across top cities is expected to slow. This adds to the hurdles facing non-bank lenders.
Overall mortgage AUM growth will remain stable at 18-19 percent in FY26. This stability is attributed to faster growth in wholesale lending. It offers a silver lining amid the home loan slowdown.
Loans against property are also expected to see slower growth. AUM growth in this segment may drop to 27-29 percent from 32 percent. The trend reflects broader market adjustments.
The competitive landscape is reshaping non-bank lenders’ strategies. They must navigate pricing pressures and customer retention challenges. Adapting to these dynamics will be crucial for future growth.