Rise in Tech Tools for Housing Credit is Helping Fuel Homeowners’ Dreams

The digital revolution has transformed many sectors, including India's housing finance industry. As demand for affordable housing among first-time buyers from economically weaker sections (EWS) and low-income groups (LIG) grows, digitalisation is helping streamline home financing through online mortgage applications, generative artificial intelligence (genAI), machine learning and fintech validations, making processes more efficient, accessible and personalised.  

Smoother Journey 

Digitalisation in housing finance is streamlining loan applications and reducing processing times. According to the National Housing Bank (2023), digital platforms have cut loan processing times by 40 per cent, improving accessibility, especially in remote areas. For first-time buyers, these platforms simplify loan comparisons and decision-making. Additionally, digital platforms provide easy access to critical information, fostering transparency and competition. This benefits EWS and LIG segments, enabling informed choices when applying for affordable housing under government schemes like the Pradhan Mantri Awas Yojana (PMAY) and the Credit Linked Subsidy Scheme (CLSS).

Machine learning (ML) and data analytics are transforming loan processing by improving efficiency, risk assessment and resource optimisation. This streamlines workflows, reduces processing times and costs, benefiting both customers and organisations. Data-driven approaches like ML and AI expand credit access by using alternative data, such as utility payments and rental history, to assess creditworthiness. This allows individuals without formal credit histories, especially in EWS and LIG groups, to access loans, broadening the pool of potential homeowners. The India Digital Credit Ecosystem report published by the Reserve Bank of India (RBI) highlights that the use of AI and ML in housing finance has improved approval rates for underserved populations by up to 25%.

Tech Transformations

The fintech sector has transformed access to affordable housing finance. Using AI and automated underwriting, digital platforms process large datasets quickly, enabling faster and more accurate loan approvals. TransUnion CIBIL reports that fintech platforms processed 40 per cent more loans than traditional lenders in three years, reducing approval times by over 50%. These solutions benefit EWS and LIG applicants by using alternative data for credit assessments. As digital footprints grow, fintechs offer personalised loan products, improving accessibility and affordability. In 2023, PwC India [a professional services firm], reported that 40 per cent of Indian consumers now use digital platforms to compare housing loans, emphasising fintech's growing role in decision-making.

With the rapid growth of digital services in housing finance, advanced data analytics and AI-driven profiling are key to personalising loan offerings. By analysing individual financial behaviour, lenders can tailor home loan products to meet specific needs, reducing default risks and enhancing affordability, especially for non-traditional borrowers in the affordable housing segment. The RBI’s 2022 digital lending guidelines also play a crucial role in ensuring secure and transparent digital lending practices, which fosters trust and accessibility for new borrowers, particularly in underserved markets.

Digitalisation not only improves efficiency and access but also contributes to environmental sustainability. By reducing reliance on paper-based processes, housing finance providers are cutting waste and minimising their environmental impact. A study by KPMG India found that the move to digital platforms in housing finance resulted in a 30 per cent reduction in paper usage, aligning well with the government’s broader sustainability goals and making the housing finance industry part of the larger movement towards a more sustainable economy.

The Indian government is also advancing digital transformation to improve access to housing finance. Under the Digital India initiative, the expansion of high-speed internet and digital literacy has driven rural internet penetration to grow 10 per cent annually, reaching over 800mn users in 2023. This infrastructure enables remote mortgage applications, bridging the urban-rural financial gap. 

Digitalisation has enhanced the reach of PMAY and CLSS. By 2023, over 1 crore homes were sanctioned under PMAY, with 30 per cent of applications processed online, streamlining eligibility checks and subsidy tracking. Urban initiatives like the Atal Mission for Rejuvenation and Urban Transformation and National Urban Livelihoods Mission support affordable housing for low-income groups through improved infrastructure and financial aid, enhancing living conditions and promoting homeownership. 

As digitalisation in housing finance grows, cybersecurity will become a key focus. With more digital transactions and sensitive data, robust security protocols like end-to-end encryption, multi-factor authentication and continuous monitoring are essential to protect systems and build trust, especially among first-time buyers and underserved groups. Regulatory frameworks from central authorities ensure high standards of data protection and transparency, reinforcing security and consumer confidence in digital lending. 

Digitalisation is making housing finance more efficient, transparent and inclusive, especially in the affordable segment. Innovations like fintech, genAI and cloud platforms are driving growth and enabling personalised loans, making homeownership more accessible. Government initiatives promoting digital literacy and infrastructure, along with fintech-driven solutions, are reshaping the industry. As digital tools advance, the vision of affordable housing for all is becoming a reality, empowering millions to own homes.

(The writer is chief technology officer at IIFL Home Finance. Views expressed are personal.)