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Affordable housing finance companies are likely to see slower growth in assets under management, with expansion easing to around 21 per cent in FY26 from 23 per cent in FY25, according to Crisil. Growth is expected to remain steady in FY27. The loan against property segment may also moderate due to tighter underwriting amid asset quality concerns. While profitability may dip slightly, it is expected to stay healthy. Rising stress in small-ticket loans, particularly in the sub-INR 15 lakh category, remains a key area to watch.
Affordable housing finance companies are expected to see a moderation in the growth of their assets under management, with expansion likely to ease to around 21 per cent in FY26 from about 23 per cent recorded in FY25, according to a recent report by domestic rating agency Crisil. The report indicated that growth is expected to remain broadly stable at 20-21 per cent even in FY27, reflecting a more cautious lending environment. Advertisement
The loan against property segment is also projected to witness some cooling, with growth estimated at 24-26 per cent in FY26, compared to around 30 per cent earlier. This slowdown is attributed to lenders tightening underwriting standards after facing asset quality pressure in certain borrower segments. As a result, credit costs are expected to edge up gradually.
From a profitability standpoint, Crisil noted that earnings may soften marginally but are likely to remain healthy through FY26 and FY27. Overall, the mortgage finance industry is projected to grow at 18-19 per cent across the two financial years.
The report flagged the performance of small-ticket loan against property portfolios as an area that needs close monitoring. Between FY24 and FY25, over 70 per cent of affordable housing finance companies reported a noticeable rise in assets overdue by more than 90 days in the sub-INR 15 lakh category, ranging between 0.25 and 30 per cent. This stress trend continued into the first half of FY26.
Crisil attributed the increase in delinquencies to higher borrower leverage, the spillover of asset quality issues from nearby microfinance borrower segments in certain regions, and portfolio seasoning. Despite these pressures, affordable housing finance companies continue to grow faster than the broader housing finance market. This is supported by lower direct competition from banks compared to prime housing loans, rising urbanisation, and government support for affordable housing construction and financing.
The report added that as banks strengthen their presence in the prime home loan segment, traditional housing finance companies are expected to shift focus towards affordable housing to tap growth opportunities and improve yields.
Source PTI
FAQ
Q1. What is Crisil-s outlook on AUM growth for affordable housing finance companies?
Crisil expects asset under management growth for affordable housing finance companies to moderate to around 21 per cent in FY26, compared with about 23 per cent in FY25. The rating agency also projects that growth will remain broadly stable at around 20-21 per cent in FY27. This suggests that while expansion will continue at a healthy pace, it will be more measured as lenders balance growth with risk management.
Q2. What are the key reasons behind the expected moderation in growth?
The slowdown is largely attributed to a more cautious lending environment. Affordable housing financiers are tightening underwriting norms after signs of asset quality stress emerged in certain borrower segments. Lenders are prioritising portfolio quality over aggressive disbursement growth, which is expected to moderate expansion but improve overall balance sheet strength.
Q3. How is the loan against property (LAP) segment expected to perform?
Growth in the loan against property segment is expected to ease to about 24-26 per cent in FY26, compared with nearly 30 per cent earlier. This moderation reflects tighter credit filters and more conservative loan-to-value ratios, particularly for smaller-ticket loans. As a result, credit costs may rise gradually, but risk-adjusted returns are expected to remain reasonable.
Q4. What trends is Crisil seeing in small-ticket loan stress?
Crisil highlighted rising stress in small-ticket LAP portfolios, especially loans below INR 15 lakh. More than 70 per cent of affordable housing finance companies reported higher assets overdue by over 90 days in this category between FY24 and FY25, with delinquency increases ranging from 0.25 per cent to as high as 30 per cent. This stress has continued into the first half of FY26, making it a key area to monitor.
Q5. What factors are driving the increase in delinquencies?
The rise in delinquencies has been linked to higher borrower leverage, spillover effects from stress in nearby microfinance borrower segments in certain regions, and the natural seasoning of loan portfolios. As loans mature, repayment behaviour becomes clearer, revealing weaknesses in specific borrower profiles, particularly in economically vulnerable segments.
Q6. How does the long-term outlook for the sector remain supportive despite these challenges?
Despite near-term asset quality pressures, affordable housing finance companies are expected to continue growing faster than the overall housing finance market. This is supported by limited direct competition from banks in the affordable segment, rising urbanisation, and ongoing government support for affordable housing. Additionally, as banks focus more on prime home loans, housing finance companies are likely to deepen their presence in affordable housing, helping sustain growth and profitability over the medium term.
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