Affordable Housing Finance Upswing: Challenges & Opportunities Ahead

Kotak Institutional Securities predicts a growth rebound for affordable housing finance companies by FY27, despite macro-economic challenges possibly affecting progress in the latter half. Industry disbursement trends are improving, with strong loan growth prospects anticipated as players adapt to competitive shifts and process changes.

Affordable housing finance companies are on track for a growth rebound by the fiscal year 2027, according to Kotak Institutional Securities. The optimism comes despite potential macro-economic hurdles that could influence the industry's momentum in the latter half of the year.

After experiencing subdued growth over the past two years due to several challenges, including a decline in low-ticket lending and increased competition, the sector has seen encouraging signs in recent months. Disbursement growth for both listed and unlisted affordable HFCs saw an increase from 10% in FY2025 to 13% in FY2026, with loan growth reaching 16%. Notably, in the second half of FY2026, disbursement growth accelerated to 19% from 12% in the first half.

Industry players are optimistic about continued positive trends, with strong loan growth projected for fiscal year 2027. Kotak reports that the impact of the rundown in low-ticket segments is largely behind, and improving collection in stressed segments, alongside the benefits of GST cuts, is boosting momentum. However, macro-economic factors like monsoon trends, inflation, and interest rates remain critical for sustaining this growth trajectory.