Housing finance companies demonstrated a robust recovery in the fourth quarter of FY26, according to a sector review report by Equirus Securities. The housing finance sector witnessed a broad-based recovery supported by better collections, lower credit costs and healthy disbursement growth. As reported by Equirus Securities, the quarter was marked by sharp asset quality recovery, healthy disbursement and AUM growth, range-bound spreads/NIMs, rapid branch expansion, lower credit costs, and strong profitability.
The sector experienced a sharp asset quality recovery in Q4FY26, with trends holding strong into April-May, as noted by Equirus Securities. The report highlighted that green shoots were visible in the third quarter before a sharp 4QFY26 recovery. Channel checks indicate healthy collections and delinquency trends, with momentum stronger than Q1FY26 despite higher rejection rates in the salaried segment. Despite challenging macro conditions, tighter underwriting and improving relationship manager attrition should keep profitability resilient.
Loan disbursements showed a strong rebound across the sector during Q4FY26. According to Equirus Securities, disbursements grew 19.5% year-on-year and 23% quarter-on-quarter in Q4FY26, with this growth momentum continuing into the current quarter. The report noted that affordable housing financiers continued to outperform larger peers, growing around 21% year-on-year compared with 9.2% and 11.6% growth for large and mid-ticket housing finance companies, respectively.
The sector had faced pressure during the first half of FY26 due to US tariff-related disruptions in gems and jewellery, leather, shrimp and textiles, along with Karnataka's E-khata implementation, relationship manager attrition and weakness in rural MSME and microfinance segments. However, lenders tightened underwriting standards early and began seeing improvement in the second half of the year. Looking ahead, Equirus Securities believes the sector is better positioned to handle challenges than the market currently assumes, with more housing finance companies now moving towards annual assets-under-management growth of over 20% and return on equity of around 15%.
