NBFC Mortgage Shares to Hit 18-19% of Loan Book by FY 2026-27

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  Published in Business and Finance on Wednesday, November 19th 2025 at 8:01 GMT by The New Indian Express
      Locale: INDIA

NBFC Mortgage Books Expected to Reach 18‑19 % of Total Loan Portfolio in FY 2026 and 2027

In a recent analysis published by the New Indian Express on 19 November 2025, the growth trajectory of the mortgage segment within India’s non‑banking financial companies (NBFCs) is laid out in detail. According to the report, the share of mortgage loans in the overall loan book of NBFCs is projected to rise to roughly 18‑19 % by fiscal years 2026 and 2027, up from the current 14‑15 % in FY 2025. The piece explains the factors behind this upswing, the regulatory backdrop, and the potential implications for the wider financial ecosystem.

1. The Current Landscape

At present, NBFCs account for a sizable portion of India’s housing‑finance market. They provide a range of home‑loan products—from purchase loans to refinance and home‑equity lines—especially to segments that banks have traditionally served less aggressively, such as rural borrowers, first‑time buyers, and small‑to‑mid‑size enterprises that wish to convert commercial properties into residential units.

The New Indian Express cites data from the Reserve Bank of India (RBI) indicating that the total loan book of NBFCs stood at about ₹5.2 trillion as of March 2025, of which mortgage loans made up approximately 14.8 %. This is a significant jump from the 12.5 % figure recorded in FY 2023, reflecting a robust demand for home financing.

2. Why the Mortgage Share Is Set to Grow

a. Rising Home‑Loan Demand

India’s housing‑finance demand has been on an upward trend driven by a combination of low interest rates, government‑backed schemes such as Pradhan Mantri Awas Yojana (PMAY), and a growing urban population. In the last quarter, the RBI reported that the domestic mortgage‑loan pipeline grew by 6.3 % YoY, the highest in the last three years.

b. Competitive Differentiation by NBFCs

NBFCs have been capitalising on technology‑driven digital platforms that enable faster KYC, quicker disbursal, and a lower cost structure compared to traditional banks. The article notes that several NBFCs have rolled out AI‑based credit scoring tools that are more attuned to non‑formal borrowers—those lacking extensive credit histories.

c. Policy and Regulatory Signals

In June 2024, the RBI released a revised “prudential framework for NBFCs” which, among other changes, allowed a higher capital buffer for mortgage‑based lending. This has made the sector more attractive for risk‑tolerant investors. Moreover, the RBI’s “Asset Classification Framework” now explicitly recognises “home‑purchase” as a preferred loan category, providing a favourable treatment in terms of provisioning norms.

d. Infrastructure‑Driven Housing Demand

Linking to a section of the article that references the National Housing Bank’s report, the construction boom in Tier‑2 and Tier‑3 cities has spurred a surge in residential projects. NBFCs, in partnership with housing developers, have begun offering “construction‑to‑completion” loan packages that cover both land acquisition and construction costs.

3. Projections for FY 2026 & 2027

The article presents a detailed chart illustrating the forecasted share of mortgage loans in the NBFC portfolio:

The upward trajectory is attributed to a steady growth rate in both the absolute size of the loan book and the share of mortgages. The growth in the mortgage segment is expected to outpace other credit lines such as working‑capital or personal loans, whose growth rates have plateaued.

4. Risks and Regulatory Safeguards

While the expansion is promising, the article warns about potential risks:

1. Asset‑Quality Deterioration: As NBFCs extend more mortgage exposure, especially to first‑time buyers, the risk of defaults could rise. The RBI’s recent guidelines call for a higher provisioning rate of 4 % for mortgage loans over the “long‑term credit” threshold.

2. Liquidity Constraints: NBFCs rely heavily on wholesale funding and deposits. A sudden tightening of credit conditions could squeeze their liquidity, especially if mortgage defaults rise.

3. Market Volatility: A potential uptick in interest rates (the RBI has signalled a gradual hike cycle) would increase servicing costs for borrowers, possibly leading to higher delinquency rates.

To mitigate these, the RBI has issued a “prudential framework” that requires NBFCs to maintain a minimum net worth of 3 % of their total exposure to mortgage loans and to hold a buffer of 1.5 % in liquid assets. Additionally, the RBI’s “Asset Classification Framework” introduces a “critical” classification for borrowers with a credit score below 650, necessitating a higher provisioning of 10 % for such loans.

5. Implications for the Broader Financial System

The growth of NBFC mortgage books carries several downstream effects:

• Bank Competition: Banks may face pressure to reduce their mortgage interest rates or offer more flexible repayment options to compete with NBFCs’ digital platforms.
• Capital Markets: NBFCs have increasingly turned to securitisation to fund mortgage portfolios. The article references a recent tranche of RBI‑approved mortgage securitisation issuances that have raised ₹200 billion.
• Housing Market Stability: A healthier NBFC mortgage market can provide a cushion against sudden shocks, but only if the credit quality remains robust.

6. Conclusion

In sum, the New Indian Express article provides a forward‑looking view of how NBFCs are positioned to become a major player in India’s housing‑finance space. With mortgage loans projected to account for 18‑19 % of their loan books in FY 2026 and 2027, NBFCs are expected to leverage technology, favourable regulatory treatment, and a growing demand for affordable housing to capture market share. Nonetheless, the sector’s expansion will need to be balanced with prudent risk management to avoid potential pitfalls that could reverberate across India’s broader financial ecosystem.