MESSAGE FROM THE BOARD OF DIRECTORS

Our Valued Shareholders,

We take pleasure in reaching you through our Annual Report for the Financial Year 2024-25. At LIC Housing Finance Limited, the year ended on a wonderful note, and we are delighted to share that we successfully delivered on the promises we made in the previous year, and our far-reaching strategy, besides displaying a strong performance in top-line.

We understand the value of dreams and work hand-in-hand with millions of aspiring Indians to nurture their cherished home-owning aspirations, enabling housing for all.

During the year, we further consolidated our position as India’s largest housing finance company, and the No. 1 company with a Loan Book of ₹ 3,07,732 crore with a much larger footprint across India. We built a huge base of customers and a growing outstanding loan book, strengthened distribution with 10,000+ hands, and focussed on growth and digital transformation.

FY 2024-25 has been a year of performance and the delivery of all that we promised in the previous year – our major technology upgrade and the overhaul of our organisational structure. We have now shifted to a new lending platform, generated more stakeholder value, expanded geographies, and contributed higher to India’s economic growth.

INDUSTRY OUTLOOK AND HOUSING DEMAND

The outlook for the housing finance industry remains positive and resilient. Structural drivers such as rapid urbanisation, rising household incomes, a growing aspirational middle class, and supportive government policies (e.g., PMAY, infrastructure status to affordable housing) continue to fuel the demand for housing finance.

Despite cyclical macroeconomic factors like interest rate volatility or inflationary pressures, housing remains a necessity-driven sector in India, especially in Tier II, III, and IV cities. The formalisation of the economy and digitisation of credit assessment are further expanding the addressable market.

We expect steady double-digit growth in housing finance disbursements over the next few years, supported by both primary housing demand and refinancing needs. Growth will be primarily driven by continued demand in Tier 2&3 cities, increasing traction in affordable housing finance, and leveraging digital lending platforms for faster disbursements.

The ongoing turn in the real estate cycle – marked by improved sales velocity, higher price realisations, and rising buyer confidence – has significantly enhanced the operating environment for previously stressed or delayed residential projects. This has also created a favourable climate for resolution of projects that were earlier constrained by execution challenges and cash flow mismatches. As a housing finance company, we are actively leveraging this opportunity.

LEVERAGING OPPORTUNITIES TO PROPEL GROWTH

The interest rate cut by the Reserve Bank of India (RBI) this year was in line with the central bank’s decisions and the current market scenario. The move was aimed at boosting consumer sentiments and stimulating housing demand. RBI’s repo rate cut is a welcome step toward easing financial pressure on households.

The real estate sector has been displaying great resilience, despite escalating geopolitical tensions and inflationary trends. Despite the growing demand from developers, we are adopting cautious stance on project loans.

However, to capitalise on this growth potential, we are contemplating to foray into the mid or mid-premium housing segment, which has been growing well and are working towards building relationships with top-rated builders in this segment, besides also exploring the semi-luxury and luxury segments.

In addition, we are advancing the “Housing for All” mission through PMAY‑U 2.0, the successor to the original urban Pradhan Mantri Awas Yojana. Under this enhanced phase, the government has set a bold target of delivering 1 crore pucca homes for Economically Weaker Sections (EWS), Low-Income Groups (LIG), and Middle-Income Groups (MIG) across urban India. As of 18^th June, 2025, approximately 7.10 lakh houses have been sanctioned – including 2.35 lakh approved in the most recent sanctioning meeting – while 93.19 lakh homes were already completed under the earlier PMAY‑U framework. The mission ensures inclusivity, with a significant focus on women (single and joint ownership), SC/ST/OBC households, and special-needs groups.

BUILDING FURTHER MOMENTUM

We remain geared to build further momentum and projecting a double-digit growth in our loan book from upwards of ₹ 3 lakh crore currently. The rapid pace of finance, affordable mortgages, increased urbanisation and changing lifestyles are seen spurring further growth in India’s Housing Finance Market, which is set to grow by 20% CAGR between 2022-2027, with growing demand across loan segments and small towns.

We continue to live our dream of building a roof for every Indian by supporting Affordable Housing, serve new home buyers and capitalise on Housing for All.

With our increasing retail mix, strong capital adequacy, comfortable liquidity position, a resilient operating model, we are poised for a positive and exciting journey ahead of us.

IMPROVING COLLECTION EFFICIENCY

Our collection efficiency continues to be good with healthy turnaround and lower GNPA. We control our NPAs with effective processes such as thorough due diligence during loan disbursement and strong systems for managing receivables and delinquencies. Our aim is to ultimately reduce NPAs to less than 1% and improve the quality of our loan book. We are also leveraging our ability to source low-cost liability from strong fundamentals and liability management and despite rising rates, we reduced costs.

Sustainable growth with prudent risk management is our priority in a dynamic interest rate and regulatory environment. Our key area of focus is to improve collection efficiency through close and continuous monitoring and systemic improvements. We are strengthening our asset quality by further improving our underwriting standards and using digital initiatives in appraising loan files.

We are also putting in place a robust credit monitoring system and strengthening the receivable management system. Our Early Warning System helps identify potential risks pro-actively, and also strengthened our internal controls and audit functions further to detect and prevent slippages through timely actions.

OUTLOOK FOR FY 2025-26

We remain cautiously optimistic for FY 2025-26. While macroeconomic uncertainties persist, including global volatility and inflationary pressures, we expect the housing sector to remain resilient. Our focus will continue to be on expanding the reach in Tier II and III cities, enhancing digital origination and collections, strengthening portfolio quality, and diversifying our liability base further. We aim to deliver double-digit AUM growth, while maintaining healthy ROA/ROE and stable asset quality.

Despite monetary tightening, we expect stable growth owing to structural housing demand, particularly in the affordable segment. We manage a continued focus on cost optimisation and leveraging technology helps absorb part of the cost pressures. Further, we have strong underwriting and collections, and our portfolio quality has remained robust despite rate hikes, thanks to conservative credit policies and efficient recovery mechanisms.

In conclusion, our strong parentage, robust housing demand, and operational discipline equip us to navigate a higher interest rate environment, while sustaining profitable growth in FY 2025-26 and beyond.

STRENGTHENING ORGANISATIONAL CAPABILITIES

LIC HFL is a very people-focussed and a proficient enterprise, operating in a multi-cultural environment. To achieve competitive superiority and scalable growth, your Company has aligned competencies of its human capital in line with its business strategies, empowered them with relevant trainings and behavioural improvements.

Your Company’s focussed aim behind this is to improve its organisational capability and vitality. Your Company is also making significant investment into its IT infrastructure to advance to the next-generation scalable and flexible technology landscape. This will help us to improve productivity, customer convenience and sustain growth. We also continue to focus on higher yield productivity with proper due diligence to mitigate risk, increasing per branch business, and enhancing per employee productivity.

IN CONCLUSION

LIC HFL is indeed well poised to maintain its steady growth trajectory going forward – by customer category, region and an expanding product portfolio.

Your Company will continue to drive innovation in India’s housing finance space to keep it standing firm as a respected peer in the business.

We look forward to the continued support of all our stakeholders in taking your Company forward on this journey of sustainable and profitable growth.

With Best Wishes,

The Board of LIC Housing Finance Limited