According to Kotak Institutional Securities, affordable housing finance companies are witnessing improving business momentum with disbursement growth rising in 2HFY26. The brokerage expects growth momentum to pick up in FY2027E, as low-ticket business rundown, process changes are reflected in the base and competitive intensity stabilises. As reported by Kotak, the slowdown caused by the rundown of low-ticket and non-home loan segments is now largely behind the sector. With a strong business environment continuing, Kotak expects healthy disbursement growth in 1HFY27E. The optimism comes despite potential macro-economic hurdles that could influence the industry's momentum in the latter half of the year.
Industry trends have already begun improving with disbursement growth for select listed and unlisted affordable HFCs increasing to 13% in FY2026 from 10% in FY2025, while loan growth stood at 16%. More significantly, disbursement growth accelerated to 19% in the second half of FY2026 from 12% in the first half of the year. According to Kotak, most managements provided positive growth commentary following 4Q results, encouraged by better momentum in 2HFY26. The report noted that with improving collections in some stress segments such as MSME loans and the positive rub-off of GST cuts, business momentum inched up in 2HFY26. With disbursement growth for select players picking up to 19% in 2HFY26 from 12% in 1HFY26, the sector is showing clear signs of recovery after experiencing subdued growth over the past two years due to several challenges, including a decline in low-ticket lending and increased competition.
With a strong business environment continuing, Kotak expects healthy disbursement growth in 1HFY27E. The brokerage projects 17-26% AUM growth for affordable HFCs under coverage on the back of 17-20% growth in disbursements for FY2027E. Companies are optimistic on improving growth with analysts expecting strong loan growth in FY27, though macro factors like trends in monsoon, high inflation and rates will likely determine the course of business in 2HFY27E. The report emphasizes that while healthy growth is expected in early FY27, macroeconomic factors may impact the businesses from second half, making the recovery trajectory dependent on external conditions. Industry players are optimistic about continued positive trends, with strong loan growth projected for fiscal year 2027.
According to Kotak, growth in the affordable housing segment had remained subdued over the past two years due to multiple factors, including a slowdown in low-ticket lending, changes in disbursement recognition norms and elevated competition. Some lenders now record loans only when cheques are cleared instead of when they are issued, which lowers reported disbursements. Many players have rundown/slowed down business in lower tickets likely reflecting challenges in the segment. The competitive landscape has been reshaped by these operational changes, with some companies adapting their reporting methods to better reflect actual business activity. However, 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 across the sector.
