The chief of India's largest home loan company has urged regulators to cap interest rates on affordable housing loans, saying some housing finance companies (HFCs) are charging 15-16% in the segment. Tribhuwan Adhikari, MD and CEO of LIC Housing Finance, suggested the Reserve Bank of India (RBI) or the National Housing Bank (NHB) prescribe a ceiling on spreads over funding costs, according to Business Today.
For corporate treasurers and investors tracking Indian interest-rate policy, the proposal directly targets the spread between HFC funding costs and loan pricing — the margin that drives profitability in the sector. Adhikari described current pricing as unaffordable, with some quoted rates reaching 16-17%. The company's own growth figures underscore the demand backdrop: net profit rose 10% to Rs 1,499 crore in Q1FY27, while loans grew 14%, the strongest pace in four to five years.
Rate cap proposal targets 15-16% affordable loans
"Affordable housing finance is a misnomer because the borrower definitely cannot afford 16%-17%," Adhikari said, according to Business Today. He added that the RBI or NHB could consider capping lending spreads. The comment distinguishes the affordable segment from mainstream home loans, where bank floating rates are linked to the RBI's repo rate.
- Some HFCs charge 15-16% on affordable housing loans.
- Adhikari proposes a ceiling on spread over funding costs.
- Banks' floating rates are repo-linked; HFCs depend on bank borrowings for about half of sector funding.
| Metric | Q1FY27 / FY27 outlook |
|---|---|
| Net profit | Rs 1,499 crore, up 10% |
| Loan growth | 14%, strongest in 4-5 years |
| Expected FY27 loan book | Around Rs 3.5 lakh crore |
External benchmark: HFCs at a disadvantage, says Adhikari
Adhikari did not see a case for linking HFC rates to external benchmarks, because about half of the sector's borrowings come from banks, Business Today reported. Unless housing finance companies received similar access to low-cost funding, such a move would put them at a disadvantage relative to banks. For treasury executives, this highlights the sensitivity of HFC funding costs to bank lending rates and any future regulatory benchmark mandate.
Cautious affordable segment entry via 'banking surrogate'
LIC Housing Finance is cautiously operating in the affordable housing segment through a "banking surrogate" product that assesses borrowers using bank statements and GST filings instead of income tax returns or salary slips, Adhikari said. The underwriting approach is designed to manage credit risk where formal income documentation is limited.
Growth momentum to continue
Adhikari expects the loan book to stand at around Rs 3.5 lakh crore by the end of FY27. While loan book growth has trailed peers because of repayments and prepayments, he said LICHF is focused on accelerating growth while retaining its assets-under-management lead over rivals. For investors, the trajectory suggests the HFC is moving from a consolidation phase to a growth phase, even as the regulatory debate over affordable loan pricing continues.
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