India’s home-loan map is no longer a story of Mumbai, Delhi, Bengaluru and a handful of other metros. According to industry data collated in SGA PR’s 2026 housing finance report The Pulse, Tier-2 and Tier-3 cities now contribute about 64% of housing loan volumes. That single figure captures a quiet but consequential shift: more Indians are taking home loans outside the traditional big-city belt than inside it.
The change does not mean metros have become irrelevant. On value, the Top 8 cities still account for roughly 52% of home-loan originations. Bigger tickets, higher property prices and premium housing still sit in the metros. What has changed is who is borrowing and where the volume is coming from. Smaller cities are generating the larger share of loan accounts. Gujarat’s FY25 pattern is a useful illustration: disbursals rose even as the number of borrowers fell by nearly 35%, pointing to larger average tickets and rising property values even as account growth cooled.
That mix — more loans in smaller towns, still-heavier rupee value in metros — is the real story of India’s housing finance market in 2025–26.
The numbers behind the shift
Outstanding individual housing loans have grown about four times in a decade, from around ₹10 lakh crore in FY15 to more than ₹37 lakh crore in FY25 and ₹44.4 lakh crore by March 2026. Housing loans as a share of GDP have moved from about 8% to 11–12%. That is still far below the United States (around 50%) and the United Kingdom (60%+). India remains underpenetrated. The growth that is happening is no longer confined to the usual urban cores.
State-wise books still show the old hierarchy. Maharashtra remains the largest home-loan market at about ₹9.8 lakh crore outstanding, followed by Karnataka, Telangana, Gujarat and Tamil Nadu. But the report is clear: incremental credit is becoming pan-India. Emerging markets are adding meaningful new borrowers even if they do not yet match metro ticket sizes.
Originations in FY26 reached ₹11.81 lakh crore, up 12.3% year-on-year, with a strong rebound in the last quarter. The ₹75 lakh-and-above segment now accounts for 41% of origination value. Volume, however, is still driven by smaller and mid-sized loans. About 24% of disbursements are below ₹25 lakh. Affordable housing is linked to roughly 34% of portfolios. The ₹25–40 lakh band is among the fastest-growing pockets.
Who is taking the loan now
The borrower is changing as much as the geography.
As of September 2024, Economically Weaker Section and Lower Income Group borrowers together made up about 39% of outstanding housing loans. The Middle Income Group accounted for about 44%. High-income borrowers were only about 17%. First-time homebuyers, self-employed people, informal-income households and thin-file customers — groups that traditional salaried underwriting often struggled to serve — are now central to the next phase of growth.
This is why the 64% volume share of Tier-2 and Tier-3 cities matters. These are not only “smaller versions of Mumbai.” They are markets where a first home is still within reach, where land prices have risen sharply in several emerging locations (the report cites a ~65% rise in some markets as of 2024), and where about 44% of land acquisitions have already shifted away from the biggest cities.
Why smaller cities are pulling ahead on volume
Several forces are working together.
Improved highways, metros, airports and local job markets have made Tier-2 and Tier-3 towns more livable. Manufacturing clusters, MSMEs and a limited shift of work away from only the largest metros have created local housing demand. High prices in prime city locations have pushed many buyers to peripheral and non-metro markets. Government housing programmes such as PMAY-Urban 2.0 and the older credit-linked subsidy architecture have kept affordable ownership on the policy agenda. Digital public infrastructure — Aadhaar, UPI, Account Aggregator and video KYC — has made it easier for lenders to underwrite borrowers who do not have a neat salary slip.
Housing Finance Companies focused on low- and middle-income customers have built dense branch networks in these towns. Platforms that match borrowers to lenders have reduced the old dependence on a single local bank branch. The result is not that metros have stopped growing. It is that the count of new home loans is now heavier outside them.
What this means for the real estate industry
For developers, the shift is a product and land story as much as a finance story.
If most loans by number are being taken in smaller cities, demand is tilting toward mid-ticket and affordable inventory, not only luxury towers in a few coastal or IT corridors. Land banks in emerging cities become more valuable. Project mix has to follow the borrower: ticket sizes around ₹25–40 lakh and the affordable band will matter more for volume absorption than they did when metro premium housing dominated the conversation.
It also changes the builder–lender relationship. Co-lending, specialist affordable HFCs, and digital origination platforms sit between the buyer and the bank. Speed of sanction, document friction and on-ground verification in smaller towns become as important as brand and location. Delayed projects and weak title or approval trails will still kill a loan file — perhaps faster in markets where lenders are expanding but local legal and technical capacity is thinner.
For housing societies and existing owners in metros, the implication is different. Metro value growth and larger tickets can continue. But the national “housing boom” narrative is no longer only a Mumbai–NCR–Bengaluru story. Inventory that does not match local incomes in smaller cities will struggle even if national loan books look healthy.
What it means for the country
A home loan in a smaller city is often a first formal, long-duration credit relationship. That has inclusion effects: EWS, LIG and MIG households building an asset, entering the documented financial system, and tying their repayment behaviour to a house rather than a short-term personal loan.
It also spreads urbanisation. If credit follows the buyer into emerging cities, construction, allied jobs and municipal demand follow too. The report frames housing finance as a stable retail asset class — large tickets, collateral, long tenors, relatively low delinquency — that can compound without the volatility of unsecured credit. Expanding that book outside metros is how India can raise housing loan-to-GDP from 11–12% toward the higher teens without relying only on already expensive city land.
The risk sits on the other side of the same coin. Field-heavy verification, partner fragmentation (DSAs, valuers, lawyers, builders), uneven digitisation and one-size underwriting still slow files. A loan that looks “digital” at application can still stall on physical documents and local checks. Transparency for the borrower — knowing where the file is stuck — remains weak in many journeys. Technology is catching up; execution has not fully caught up.
What lies next
The SGA PR outlook to 2030 is straightforward. Housing loan-to-GDP could move toward about 18%. Digital sourcing could cross 70%, with aggregators, assisted-digital journeys and marketplaces taking a larger share from pure branch origination. Account Aggregator data could become a core underwriting layer for self-employed and informal-income borrowers. Affordable housing and emerging-city demand are expected to drive most incremental growth. AI-assisted income assessment, fraud checks and portfolio monitoring are likely to become standard rather than experimental.
None of that is guaranteed. It depends on asset quality holding as lenders go deeper into thinner files, on cities delivering infrastructure and approvals, and on borrowers in smaller towns getting a process that is as clear as the marketing. For now, the fact pattern is already visible: more home loans, by volume, are being taken away from the old metro core. That is the phenomenon the housing industry has to plan around — not a future scenario, but the present map.
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