Tepid home sales outlook may temper new loans for NBFC: Crisil

New mortgage loans from non-banking finance and housing finance companies will face challenges from a potential slowdown in residential home sales and competition from banks in the current fiscal, according to Crisil ratings.

This may lead to mortgage finance, that includeshome loans, loans against property, lease rental discounting and developer finance, growing at 18% in the current fiscal or almost the same pace as in the previous fiscal.

Home loans, that comprise 59% of the assets under management of NBFCs, are expected to climb at a moderate 12%-13% in the current and subsequent fiscals, slower than the 14% in fiscal 2025. Loans against property will also grow at a slower pace of 27%-29% against 32% in the previous fiscal. Developer finance and rental leasing are expected to keep overall loan growth buoyant.

NBFCs are facing competitions from banks in terms of loan pricing. “Competition on pricing is evident from the strong growth in lower-interest rate home loans of banks — the share of the sub-9% interest rate portfolio increased to over 60% as on March 31, 2025, from about 45% last year. As a result, many large HFCs are facing increased customer churn through balance transfer cases.” said Subha Sri Narayanan, director, Crisil Ratings.

Loans against property (LAP) peaked in fiscal 2024 and are expected to normalise in the current fiscal, said Aesha Maru, associate director, Crisil Ratings, adding there was a spurt in delinquencies in this segment. “Delinquencies in the LAP segment are increasing, with the smaller ticket sub-segments seeing more of it. Lenders catering to that specific sub-segment are exercising caution, even as growth in the larger ticket size segment remains strong,” she said.

For non-banks to grow, they will have to adapt to more competitive business models , the rating agency said.