Despite demand being high, affordable housing is facing supply-side issues, D Lakshminarayanan, MD of Sundaram Home Finance, tells Narayanan V in an interview. He also speaks about the overall housing demand, the impact of GST and the lender’s plans to scale up the emerging business segment. Excerpts:
How is the demand sentiment in the housing segment?
Overall, the housing market has been strong and resilient over the last few years. There was a year-on-year dip in the first half, but the Q2 was better than Q1. This is the scenario in the top 8-10 cities in the country, but small towns have been growing fast. I so not see any change in this trend on the back of economic development.
You recently entered the affordable housing segment. How is the demand there?
There has been a unique challenge in that segment of the housing market. There have been supply-side issues while the demand continues to be high. The uptick in the upper end of the housing market, coupled with the increase in affordability among consumers, has induced builders to focus on the luxury segment (3-4 bed rooms) which is price inelastic and involves lesser units at a higher margin. For these reasons, volumes in the affordable housing market dropped in the last couple of years.
Also, there needs to be a redefining of the affordable housing category based on geography. While the regulator defines the unit to cost not more than Rs 45 lakh and the financing to be up to Rs 35 lakh, we believe this rule should not be the same across geographies. In the long term, the affordable housing market will grow as there is a genuine demand. Our country will not be driven by the luxury housing market. I see the affordable housing segment settling down and starting to grow in 12-18 months. In smaller towns, the demand for affordable housing will be high.
What will be the impact of the GST rate cut and income tax slab revision?
I certainly think that more money in the hands of the people will drive demand for properties. Demand is already strong in the housing market and this will continue to grow.
What is the impact of the repo rate cut?
The transmission is happening slowly. Our lending rates have come down after the repo rate cuts. However, there has not been a big change in the rates between 2018 and now. It went down during the pandemic, then went up for a while and then has come down again. Given property mortgage loans are for 20-25 years, rates only play that much of a role. There is also the option for floating-rate loans. I would say the decision to purchase a property does not get much influenced by a 0.25% cut or hike in rates.
How big is your emerging business (EB) segment. What are your plans to grow this portfolio.
We were a prime housing finance company till three years ago, typically financing home loans of around ₹50 lakh. In October 2022, we diversified into small-ticket loans and the affordable housing finance segment, which we call the EB segment. It is currently about 3% of our overall business which we intend to take to 10-15%. A large part of this growth will be driven by our branch network expansion, primarily in Tier II and III towns.
What’s your disbursement target for FY26?
The first half of the year was fairly on track and we are sticking to our original growth plans. Last year, we disbursed over ₹6,500 crore and expect a reasonable growth this year. Our managed assets under management as of September 2025 stood at ₹18,572 crore.