Opinion – Solar Leasing Models Gain Traction As NBFCs Expand Financing Options

India’s renewable energy landscape is at a crucial juncture. With solar capacity crossing 82 GW as of July 2025, the sector is steadily advancing toward the national target of 500 GW of non-fossil fuel energy by 2030. While large utility-scale projects have dominated growth so far, the next wave is expected to come from rooftop and distributed solar. However, adoption in this segment continues to face financing challenges. Upfront capital requirements remain a hurdle for small businesses, housing societies, and households, even though the costs of solar power have declined significantly over the past decade. Against this backdrop, solar leasing models combined with innovative financing structures are gaining momentum, particularly as Non-Banking Financial Companies (NBFCs) step up their role in enabling access to clean energy.

Rising Relevance of Solar Leasing

Solar leasing operates on a simple premise: instead of owning the system, a consumer pays a fixed monthly lease or usage fee while enjoying the benefits of reduced electricity bills. This model eliminates the need for heavy upfront capital expenditure and shifts the responsibility of installation, operation, and maintenance to the service provider. Globally, such models have helped scale rooftop solar markets, especially in the United States and Europe. India is now seeing a similar transition as leasing aligns well with the financial limitations of micro, small, and medium enterprises (MSMEs) and even residential consumers.

Reports indicate that only about 13 GW of India’s 82 GW solar capacity comes from rooftop installations. The Ministry of New and Renewable Energy (MNRE) has been pushing to expand this share significantly under the PM-Surya Ghar Muft Bijli Yojana, which aims to reach 10 million households by 2026. For such ambitious targets, traditional financing routes will not be sufficient. Leasing presents itself as a flexible solution, particularly when coupled with the outreach of NBFCs.

The Expanding Role of NBFCs

NBFCs in India have steadily evolved into vital players in renewable energy financing. According to the Reserve Bank of India, the NBFC credit book crossed ₹43 lakh crore in FY24, with energy and infrastructure loans forming an increasing proportion of the portfolio. Several NBFCs are piloting solar leasing and pay-as-you-save schemes to tap into underserved markets. Unlike commercial banks that often demand higher collateral and have longer approval timelines, NBFCs provide quicker, tailored financing products that can integrate leasing models into structured repayment plans.

In the rooftop solar segment, this is particularly important. A medium-sized MSME might require a solar system costing between ₹25 lakh and ₹50 lakh. For such enterprises, capital-heavy investments are often deprioritized in favor of working capital needs. Leasing arrangements, supported by NBFC financing, allow them to adopt solar without straining balance sheets. Over the lease period, the savings on electricity bills often exceed the lease payments, creating a positive cash flow from the first year itself.

Policy Support and Market Growth

The traction for leasing models is also supported by favorable policy and regulatory developments. The government has extended the Production Linked Incentive (PLI) scheme for solar module manufacturing and announced viability gap funding for rooftop solar projects. State regulators in Gujarat, Maharashtra, and Karnataka have recently clarified net-metering and open access provisions that make leased rooftop projects more attractive. According to a 2025 report by the International Energy Agency (IEA), distributed solar in India could grow at a compound annual growth rate (CAGR) of over 25 percent till 2030 if financing bottlenecks are addressed effectively.

NBFCs are well-positioned to play a catalytic role here. They are increasingly collaborating with specialized renewable energy service companies (RESCOs) to structure lease agreements, securitize receivables, and provide blended finance solutions. International climate funds and multilateral institutions are also beginning to partner with Indian NBFCs, recognizing their reach and agility in last-mile financing.

Global Parallels and Indian Adaptation

Globally, solar leasing contributed significantly to rooftop adoption in countries like the United States, where third-party ownership models accounted for nearly 60 percent of residential solar installations at their peak. Europe too witnessed strong growth, supported by green financing initiatives. The Indian context, however, has unique characteristics. Average household incomes, the importance of subsidies, and the role of informal enterprises mean leasing structures must be tailored carefully. Lease durations tend to be longer, risk mitigation needs to be stronger, and servicing models must account for variable payment capacities. This is where NBFCs, with their ability to design flexible repayment schedules and their experience with small borrowers, can provide the bridge.

Opportunities for Households and MSMEs

For households, especially those benefiting from government subsidy programs, leasing can lower entry barriers. Instead of paying ₹60,000–₹70,000 upfront for a rooftop system, a household could sign a 7–10 year lease, pay a fixed monthly fee, and still save on electricity bills. For MSMEs, which account for nearly 30 percent of India’s electricity consumption, leasing provides an opportunity to hedge against rising grid tariffs. Between 2018 and 2024, industrial electricity tariffs rose by over 20 percent in many states. A leasing model with predictable payments allows businesses to achieve cost stability and sustainability at the same time.

The Road Ahead

India’s renewable energy journey is increasingly shifting from centralized utility projects to decentralized adoption. Solar leasing supported by NBFC financing is set to play a defining role in this transition. The combination addresses three critical challenges: reducing upfront costs, expanding access to credit, and providing operational support to end-users. However, scaling this model will require continuous regulatory support, awareness campaigns, and robust risk-sharing mechanisms between financiers and developers.

As of July 2025, India’s solar sector is at an inflection point. With distributed solar expected to add nearly 50 GW of capacity by 2030, the leasing model could emerge as a mainstream financing approach. NBFCs, by virtue of their flexibility and reach, are central to this growth story. Their ability to design innovative financial products, collaborate with developers, and leverage climate-linked capital flows will determine how quickly India can democratize solar access. The opportunity is vast, and the momentum is building. Solar leasing models are no longer experimental; they are becoming essential instruments in India’s clean energy financing architecture. The next few years will reveal how effectively NBFCs can scale these solutions to transform rooftops across cities, towns, and industrial clusters into engines of sustainable growth.

By Pratik Mandvia, Solar Business Head of Mufin Green Finance