9 months ago
Affordable Housing Finance Sector Sees Mixed Trends
The affordable housing finance sector had a mixed quarter.
While priority-sector housing loans grew strongly due to increased demand and regulatory changes, overall housing loan growth slowed down.
HomeFirst Finance, a major lender, showed resilience with improved margins and fee income, but also faced higher early delinquencies.
The sector is expected to grow more slowly in the next few years, with credit costs remaining elevated.
Priority-sector housing loans surged 26.7% in FY25 due to increased demand and regulatory changes
Overall housing loan growth moderated to 9.7% in August 2025, down from 37.7% in August 2023
HomeFirst Finance showed resilience in Q2FY26 with improved margins and fee income, despite slower disbursements and higher early delinquencies
Credit cost for the affordable housing finance sector expected to stay elevated at 35-50 basis points over FY26-FY28
Growth outlook for the sector moderates to 17-20% between FY25 and FY28, down from 35% CAGR over the past five years
- Who
- Affordable housing finance sector lenders, including HomeFirst Finance, and borrowers
- What
- Faced mixed trends in Q2FY26 with strong priority-sector loan growth, slower overall housing loan growth, and varying performance among lenders
- Where
- India, particularly in tier 2/3 cities and new urban corridors
- When
- In Q2FY26
- Why
- Due to increased demand, regulatory changes, and economic conditions
Optimistic View
Cautious View
Loan Growth
Optimistic View
Priority-sector loans grew strongly, indicating sustained demand
Cautious View
Overall housing loan growth moderated, suggesting potential slowdown
HomeFirst Finance Performance
Optimistic View
Improved margins and fee income show resilience
Cautious View
Higher early delinquencies and slower disbursements warrant close monitoring
Key facts
- Priority-sector housing loan growth (FY25)
- 26.7%
- Overall housing loan growth (August 2025)
- 9.7%
- HomeFirst Finance net interest margin
- 5.4%
- HomeFirst Finance fee income
- Rs 21.3 crore
- Credit cost outlook (FY26-FY28)
- 35-50 basis points
- Growth outlook (FY25-FY28)
- 17-20%
Quotes
Vivek Iyer
Partner and Financial Services Risk Leader, Grant Thornton Bharat
“Affordable housing has long been a government priority, with regulatory enablement contributing to the momentum.”
thehindubusinessline.com
Kapil Maurya
Executive Director, Urban Money
“The sharp rise in PSL housing loans reflects a clear and sustained demand in the affordable and lower-middle income housing bracket, especially in tier 2/3 cities and new urban corridors.”
thehindubusinessline.com
Varun Jhaveri
Founder & CEO, Bankyatri
“The mindset has evolved. Earlier, families preferred saving up before buying a home. Today, more borrowers are willing to take 20-year loans to move in sooner.”
thehindubusinessline.com
Sources
Lenders face stress in micro loans against property as delinquencies rise
Priority-sector housing loans surge 26.7% in FY25 on higher demand for affordable homes
Bernstein bullish on this affordable housing finance stock, sees up to 38% upside potential
3 big challenges for affordable housing finance sector: From higher credit costs to slowing growth – A deep dive
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