Housing financiers chase pot of gold in affordable loans segment

India's mortgage lenders are increasingly looking to finance affordable homes, betting on higher returns and backing from government housing schemes.

- Anshika Kayastha & Shayan Ghosh

The push comes at a time of stiff competition from banks in the prime housing space. Banks and traditional housing finance companies (HFCs) prefer borrowers with high credit scores to extend loans at relatively lower rates, while affordable housing finance focuses on new-to-mortgage customers, especially in semi-urban and rural areas, with the potential to charge higher rates.

"Loan yields are certainly healthy in the affordable housing space vis-a-vis prime housing," said A.M. Karthik, senior vicepresident and co-group head of financial sector ratings at Icra Ltd. "Secondly, there are competitive pressures in the typical larger-ticket prime housing loans from banks. Thirdly, there is a good amount of growth opportunity in the affordable space."