While business trends are improving for affordable housing finance companies (HFCs) with growth recovery expected from FY27, macro-economic factors may impact the businesses from the second half, as per Kotak Institutional Securities.

The brokerage said 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.

“We expect growth momentum to pick up in FY2027E, as low-ticket business rundown, process changes are reflected in the base and competitive intensity stabilises, following encouraging industry trends in 2HFY26,” the report said.

Kotak noted that industry trends have already begun improving. Disbursement growth for select listed and unlisted affordable HFCs increased to 13 per cent in FY2026 from 10 per cent in FY2025, while loan growth stood at 16 per cent. More importantly, disbursement growth accelerated to 19 per cent in the second half of FY2026 from 12 per cent in the first half of the year.

“Most managements provided positive growth commentary, following the 4Q results, encouraged by better momentum in 2HFY26,” it further noted. “Disbursement growth for select players picked up to 19 per cent in 2HFY26 from 12 per cent in 1HFY26.”

With a strong business environment continuing, “we expect healthy disbursement growth in 1HFY27E,” the report said. According to the report, the slowdown caused by the rundown of low-ticket and non-home loan segments is now largely behind the sector. “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,” it said.

Furthermore, 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,” it noted. Companies are optimistic on improving growth with analysts expecting strong loan growth in FY27, but “macro factors like trends in monsoon, high inflation and rates will likely determine the course of the business in 2HFY27E.”

“We build in 17-26 per cent AUM growth for affordable HFCs under coverage on the back of 17-20 per cent growth in disbursements for FY2027E,” the report added.

Published on June 25, 2026