4 Stocks to Watch as India’s Housing Finance Boom Set to Skyrocket

India’s housing finance market is set to more than double from ₹33 lakh crore to ₹81 lakh crore in the next five years, driven by strong fundamentals and government incentives. Banks currently dominate the sector with a 74.5% market share, while Housing Finance Companies (HFCs) hold around 19%, a trend expected to continue. HFCs’ loan portfolio grew 13.2% in FY24 to ₹9.6 lakh crore, with projected growth of 12.7% in FY25 and 13.5% in FY26. PNB Housing Finance Ltd saw 30% YoY growth in retail loans, with a 127% surge in affordable housing loans.

HUDCO achieved its highest-ever loan disbursements of ₹31,760 crore, focusing primarily on urban infrastructure. LIC Housing Finance Ltd recorded 2% YoY growth in disbursements but faces stiff competition in the premium home loan segment. Bajaj Housing Finance Ltd saw 26% AUM growth, with home loans forming 56% of its portfolio. Stocks of these companies have shown positive momentum, with PNB Housing Finance (+4%), HUDCO (+2%), LIC Housing Finance (+3%), and Bajaj Housing Finance (+2%). With the housing finance sector booming, these four stocks present attractive investment opportunities.

4 Stocks to Watch as India’s Housing Finance Boom Set to Skyrocket

India’s housing finance sector is on the brink of massive expansion, with projections indicating it could more than double in size over the next five years. According to a report by CareEdge Ratings, the market is expected to grow from ₹33 lakh crore (as of March 2024) to ₹81 lakh crore by 2029. This surge is driven by strong economic trends, increasing demand for homes, and supportive government policies aimed at making housing loans more accessible. For investors, this booming sector presents exciting opportunities. Here’s a look at four key players positioned to benefit from this growth.

Market Overview: Banks Dominate, HFCs Hold Steady

Banks currently lead the housing finance market, holding a dominant 74.5% share due to their lower borrowing costs and extensive branch networks. Meanwhile, Housing Finance Companies (HFCs), which account for 19% of the market, are expected to maintain their position. In FY24, HFCs saw 13.2% growth in their loan portfolios, reaching ₹9.6 lakh crore. Analysts predict continued growth of 12.7% in FY25 and 13.5% in FY26, backed by strong capital reserves and increasing investments in housing projects.

1. PNB Housing Finance Ltd

A subsidiary of Punjab National Bank, PNB Housing Finance specializes in home loans and retail lending. With 305 branches nationwide, the company is focusing on the affordable housing segment, a high-growth area, while gradually reducing corporate lending.

• Recent Performance: Retail loan disbursements surged 30% year-on-year (YoY) to ₹5,380 crore in Q4 FY24, with affordable housing loans soaring 127% to ₹920 crore.
• Strategy: Expanding its retail portfolio, especially in smaller cities and towns.
• Stock Snapshot: Market cap: ₹22,367.85 crore | Share price: ₹860.55 (+4%)

2. HUDCO (Housing & Urban Development Corporation)

A government-owned entity, HUDCO was recently granted Navratna status, recognizing its operational excellence. The company primarily finances urban infrastructure and affordable housing projects.

• Recent Performance: Recorded its highest-ever loan disbursements of ₹31,760 crore in the first nine months of FY25. Affordable housing loans made up ₹1,332 crore (4%), while urban infrastructure accounted for ₹30,428 crore (96%).
• Stock Snapshot: Market cap: ₹40,628.56 crore | Share price: ₹202.95 (+2%)

3. LIC Housing Finance Ltd

Backed by India’s largest insurer, LIC Housing Finance is a major player in long-term home loans. However, it faces intense competition from banks, particularly in the premium home loan segment, which has slowed its growth compared to competitors.

• Recent Performance: Loan disbursements grew modestly by 2% YoY to ₹15,475 crore in Q4 FY24.
• Challenges: Needs to innovate and enhance digital offerings to compete with banks’ aggressive pricing.
• Stock Snapshot: Market cap: ₹31,436.10 crore | Share price: ₹571.50 (+3%)

4. Bajaj Housing Finance Ltd

A subsidiary of Bajaj Finance, Bajaj Housing Finance provides home loans, loans against property, and developer financing. Its diverse portfolio and backing from the Bajaj Group position it well for growth.

• Recent Performance: Assets Under Management (AUM) increased 26% YoY to ₹1,08,314 crore, with home loans comprising 56% of its portfolio. Loan disbursements rose 17% YoY to ₹12,571 crore.
• Stock Snapshot: Market cap: ₹1,02,852.61 crore | Share price: ₹123.50 (+2%)

Why This Sector Matters

India’s housing finance boom is fueled by several factors, including government subsidies for first-time homebuyers, tax benefits on housing loans, and urban development initiatives. Additionally, rising incomes and rapid urbanization are driving higher homeownership rates. While banks remain the top lenders, HFCs are carving out niches in affordable housing and specialized loans, offering tailored solutions for borrowers.

Conclusion

With the housing finance market set for rapid expansion, PNB Housing, HUDCO, LIC Housing, and Bajaj Housing are well-positioned to benefit. Investors should monitor their strategies, particularly in affordable housing and infrastructure financing, as these areas offer high growth potential. While risks such as competition and interest rate fluctuations exist, strong market fundamentals and policy support make housing finance a compelling long-term investment opportunity. Keeping an eye on quarterly results and regulatory changes will be key to navigating this dynamic sector.