Affordable Housing Accounts For 68 Per Cent Of Active Home Loans As Tier-II, III Markets Gain Ground: CRIF

Affordable housing continues to account for the bulk of India’s home loan market, with nearly 68 per cent of active housing loans falling in this segment as of August 2026, according to a report by CRIF Credit Information Services Pvt Ltd, formerly CRIF High Mark.

More importantly, affordable housing is bringing a large number of first-time borrowers into the formal credit system. More than one in five affordable housing loan originations by volume comes from new-to-credit (NTC) borrowers, compared with a lower proportion in larger-ticket housing loans.

The trend suggests that affordable housing is not merely a low-ticket segment of the housing finance market. It is also an important entry point for households that are accessing formal housing credit for the first time.

“Affordable housing continues to play a critical role in expanding homeownership, financial inclusion and credit penetration,” the report said.

While the share of affordable housing in overall portfolio outstanding has moderated, the segment remains the largest by borrower volume. The report also points to a gradual shift in growth towards smaller cities, peripheral locations and markets beyond the top 100 cities.

Nearly 79 per cent of the affordable housing portfolio is concentrated across the top 10 states, with growth increasingly coming from locations beyond the major urban centres. Uttar Pradesh and Rajasthan have emerged as some of the important growth markets.

First-Time Borrowers Remain Important

The relatively high share of NTC borrowers is one of the strongest indicators of the role affordable housing plays in expanding access to formal credit.

NTC borrowers have accounted for around 20-22 per cent of affordable housing loan originations during the period studied. At the same time, new-to-product (NTP) borrowers account for nearly 70 per cent, indicating that many borrowers are accessing a particular credit product for the first time even if they already have some borrowing history.

This could become increasingly important as lenders look beyond established urban markets for their next phase of growth.

HFCs have also increased their presence in affordable housing. Their share of the outstanding portfolio went up from 26.9 per cent in August 2021 to 31.4 per cent in August 2026, according to the report.

The rise has come as HFCs have expanded lending to borrowers looking for smaller home loans. For HFCs, affordable housing has thus become a bigger part of their loan book than it was five years ago.

Small-Ticket Property Loans See Strong Demand

The other segment seeing rapid growth is Micro LAP, or loans against property of up to Rs 25 lakh. These smaller loans now account for 85.6 per cent of all active property loans.

As of August 2026, the Micro LAP portfolio stood at Rs 4.7 lakh crore, spread across 83.1 lakh active loans. The portfolio has grown at nearly 20 per cent annually over the past five years, with HFCs, NBFCs and small finance banks all expanding their presence.

The momentum has continued this year. In the first quarter of FY27, lenders disbursed nearly Rs 32,000 crore through 4.3 lakh Micro LAP accounts. The value of fresh originations was up 8.8 per cent from a year earlier.

HFCs have been particularly aggressive in this space. Their Micro LAP portfolio grew 21.1 per cent year-on-year as of August 2026. Small finance banks have also been expanding, although from a much smaller base.

The numbers point to a simple shift in the borrowing market: there is strong demand for relatively small, secured loans, particularly from customers who may not have easy access to conventional bank credit or larger home loans.

The Smallest Loans Need A Closer Look

Rapid growth does not mean the segment is without risks. While repayment performance has improved across most Micro LAP categories, the smallest loans - those below Rs 10 lakh -continue to need closer monitoring.

The report also flags borrowers who have gold loans as a group that lenders need to watch more carefully. Around 9 per cent of Micro LAP borrowers have gold loan exposure, and this group has recorded relatively higher delinquency.

For lenders, this means looking at the borrower's overall debt burden rather than assessing each loan separately. A customer who has a property-backed loan as well as a gold loan may have a different repayment capacity from someone with only one secured loan.

For the Micro LAP market, therefore, the challenge is not simply to grow the loan book. As lenders move deeper into smaller towns and underserved borrower segments, maintaining credit quality will be just as important as finding new customers.

Affordable housing loans, meanwhile, have also shown improvement in asset quality across key delinquency buckets over the past year. The Rs 10-25 lakh loan category recorded particularly notable improvement across lender categories.

Growth Moves Beyond Big Cities

The broader picture emerging from the report is that the next phase of housing finance growth may come increasingly from borrowers and locations outside the traditional urban markets.

For lenders, this means finding ways to assess borrowers with limited formal credit histories while keeping underwriting costs under control. Alternative data, digital underwriting and better access to borrower information could become increasingly important in this process.

Industry sentiment is also positive. Nearly 72 per cent of stakeholders surveyed by CRIF consider affordable housing either extremely or moderately promising over the next one to three years.

For borrowers, the significance is equally important. Affordable housing and Micro LAP are widening access to secured credit at a time when rising property prices are making home ownership increasingly difficult for many households.

The challenge for lenders will be to maintain that access without compromising credit quality.