On Wednesday, CRISIL released a report stating that Non-bank lenders (like housing finance companies that are not regular banks) are expected to grow more slowly in giving out home loans in FY26. Their growth may drop to 12–13%, compared with 14% last year.
Because government-owned banks are competing very aggressively. They are offering cheaper home loan interest rates, and this is attracting many customers. They are offering cheaper home loan interest rates, because of this, many borrowers are switching their existing home loans from non-bank lenders to these state-run banks — a process called balance transfer.
Key points of the report:
- Public sector banks have now overtaken home-loan–focused non-bank lenders in the prime (good, low-risk) home loan segment.
- A big share of bank home loans now carry interest rates below 9%, rising from 45% last year to more than 60% by March 2025.Because of this banks are offering cheaper loans.
- Home loans are very important for non-bank lenders, Home loans make up 59% of all their mortgage business. So losing customers here hurts them.
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Non-bank lenders say the low rates offered by government banks are hurting the overall market and slowing their growth. Demand for the house is still strong. Long-term housing demand drivers—like low homeownership levels, more people moving to cities, and better affordability—are still positive.
Even though the overall housing market still has positive factors (like demand for homes), non-bank lenders are feeling the pressure. They’re finding it harder to keep or attract home-loan customers. Other challenges for non-bank lenders include slower growth in residential property sales in major cities. In addition, loan segments such as loans against property are projected to grow at a slower pace.