Summary of this article
Home loan market may reach USD 809 billion.
Tier 2 and 3 cities drive demand.
Digital lending supports housing finance growth.
India’s home loan market is projected to expand by nearly 88 per cent between 2026 and 2031, rising from $430.74 billion to $809.07 billion, according to a report by Mordor Intelligence. The report states that the market is expected to register a compounded annualised growth rate (CAGR) of 13.44 per cent during the forecast period. This huge growth rate is supported by rapid urbanisation, formal sector employment, and increasing housing demand beyond the country’s metro cities, the report added.
Rise in Tier 2 and Tier 3 Housing
The increased migration towards tier-2 and tier-3 cities has increased the housing potential outside of metro cities, the report said. Lower land prices, expanding employment opportunities, and improved transport and infrastructure have catered heavily to the demand in smaller urban centres. This rise is expected to generate a durable pipeline for home loans, as households seek formal financing when it comes to purchasing homes, it added.
Jitender Yadav, director, Roots Developers, said: “The Indian home loan market is on a massive growth graph, projected to reach $809 billion by 2031, according to a recent Mordor Intelligence report. This isn’t just a market momentum, but a reflection of a deeper demographic shift. We are seeing a diverse spectrum of risk appetites, where borrower behaviour is shaped by long-term stability rather than just interest rate sensitivity.”
He added: “In the Delhi-National Capital Region (Delhi-NCR), especially Gurugram, this resilience is palpable. Gurugram’s high-income professional base is driving a robust demand for premium residential assets, and viewing real estate as a core hedge against inflation. Despite global fluctuations, the local appetite remains aggressive, fuelled by a stable corporate ecosystem and a clear preference for quality projects across plots, gated communities, and high-end apartments.”
Positive Monetary Conditions
Monetary conditions are also expected to support the sentiment in the market. According to the report, supported repo rates improve housing affordability for prime borrowers and create a much more supportive environment for home loan lending. Floating-rate loans continue to dominate the market, accounting for 73.37 per cent of the market share in 2025. However, fixed-rate home loans are projected to be the fastest-growing loan category, with a CAGR of 17.24 per cent through 2031. Even private banks and non-banking financial companies (NBFCs) are competing through faster digital onboarding and underwriting.
Government-Backed Housing Under PMAY-CLSS
Another key driver behind this growth is government-backed schemes. While non-subsidised loans have accounted for 71.37 per cent, the Pradhan Mantri Awas Yojana – Credit Linked Subsidy Scheme (PMAY-CLSS) beneficiary segment is expected to grow at 16.44 per cent through 2031. The report said that housing subsidies are expected to strengthen affordability, especially among lower and middle-income households.
Overall, an expansion in formal employment, urban migration, digital lending, stable lending rates and government housing initiatives has added to the growth in the Indian real estate market, the report further said.
