India's financial inclusion story is often celebrated as one of the country's biggest economic successes. Formal credit has reached millions of households that were once excluded from the banking system. Today, a customer in a small town can get a personal loan through a mobile app, a micro loan at their door step, pledge gold for instant credit, finance a two-wheeler, or buy a consumer durable on EMI. Yet there is one striking exception. The same borrower who can access multiple forms of formal credit often struggles to obtain a housing loan. This raises an uncomfortable question: has India expanded credit access, but failed to expand housing finance access?
Recent credit trends suggest exactly that.
According to CRIF's How India Lends report, personal loans now account for 39% of retail credit demand in India. The personal loan portfolio stood at Rs 16.5 lakh crore as of March 2026, growing nearly 13% year-on-year, while originations surged almost 29% during FY26. Meanwhile, more than 1,725 lakh personal loans originated during the year.
Gold loans tell a similar story. Outstanding gold loan portfolios have crossed Rs 18.6 lakh crore, growing more than 50% year-on-year, making gold loans the second-largest retail lending category after home loans. FY26 alone saw over 1,647 lakh gold loans originated, with loan values growing by an extraordinary 74% year-on-year.
The message is unmistakable: lower and middle-income India is not outside the formal credit ecosystem. It is borrowing actively. Yet when it comes to housing finance, the story changes dramatically. Data from recent borrower studies indicates that lower and middle-income households use housing finance at roughly half the rate of upper-middle-income households, despite having a significantly greater need for external financing. This is not because they lack aspirations. In fact, home ownership remains one of the strongest financial goals across India. Nor is it because they lack borrowing behaviour. The same customer who has successfully availed a gold loan, a personal loan, a consumer durable loan and a two-wheeler loan often remains outside the formal housing finance system.
This paradox deserves greater attention.
Housing loans are among the cheapest forms of retail credit available. They are long-tenure loans backed by an asset, allowing borrowers to spread repayments over many years. From a purely financial standpoint, they are always far more affordable than unsecured personal loans. They also easy to manage with longer tenure and smaller EMIS. Yet many families continue to fund home construction through personal loans, informal borrowings, advances from relatives, local financiers or repeated gold loans. Why would borrowers choose costlier credit over cheaper credit? The answer lies not in the product but in the process.
Also Read: Affordable Housing Segment Faces Rs 55,000 Cr Funding Gap: ANAROCK
For millions of self-employed Indians, small business owners, traders, service providers and agricultural households, accessing housing finance remains significantly harder than accessing other forms of credit. Property documentation requirements, title verification, registration complexities, technical assessments, Legal dlignence and long approval cycles create barriers that do not exist in most retail lending products.
As a result, borrowers often choose the path of least resistance rather than the path of lowest cost. This should concern us because India's next housing growth cycle will not be driven solely by salaried metropolitan consumers. It will increasingly come from self-employed households in Tier II, Tier III and rural markets.
Importantly, these are not invisible borrowers. The rapid expansion of personal loans and gold loans proves that lenders have already reached them. Gold loan portfolios have grown more than 50% over the last year, while personal loan originations crossed Rs 11.4 lakh crore in FY26. These borrowers are already participating in the formal credit economy and demonstrating repayment behaviour. The real challenge, therefore, is not demand generation. It is enabling borrowers to access the right form of credit for the right purpose.
For years, housing has been viewed primarily through a supply-side lens, more projects, more homes and more construction. But there is an equally important demand-side challenge hiding in plain sight. India has successfully built distribution networks for personal loans, gold loans and consumer finance.
The next phase of financial inclusion will depend on whether it can do the same for housing finance. Because when families finance homes through short-term and expensive credit while affordable housing loans remain out of reach, the problem is not a lack of demand. It is a gap in access and information. There is a perceptible lack of clarity on the benefits of a home loan and process of availing them. And closing that gap may be one of the biggest opportunities in Indian housing today.
