India’s housing finance companies (HFCs) have emerged remarkably stronger after navigating a highly stressful first half of the 2026 fiscal year (FY26). According to a comprehensive sector review report by Equirus Securities, a broad-based recovery in the fourth quarter (Q4FY26) has sharply improved asset quality, accelerated loan growth, and left the sector primed for a resilient FY27.
Understanding the FY26 Turnaround
The housing finance sector faced severe headwinds during the first half of FY26, heavily impacted by macro disruptions. However, aggressive defensive measures by lenders saved the year.
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The Initial Stress: Early FY26 was marred by export disruptions in key sectors (like gems, jewelry, textiles, leather, and shrimp) caused by U.S. tariff changes. Growth was further dragged down by local administrative challenges—such as Karnataka’s digital E-khata real estate land records system implementation—high employee turnover among relationship managers, and widespread weakness in rural MSME and microfinance lending.
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The Correction: Recognizing these risks early, lenders significantly tightened their underwriting standards (loan approval criteria) and stepped up collection efforts.
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The Result: “Green shoots” emerged in the third quarter, culminating in a stellar, highly profitable rebound in Q4FY26 characterized by falling credit costs and expanding branch networks.
Loan Growth: Affordable Housing Outperforms
Loan disbursements across ten major listed housing finance companies saw a major rebound in Q4FY26, surging 19.5% year-on-year and 23% quarter-on-quarter.
While non-housing segments like Loans Against Property (LAP) and MSME lending helped drive late-year momentum, smaller-ticket affordable housing lenders heavily outperformed the industry giants.
| Financier Segment | Year-on-Year Assets Under Management (AUM) Growth |
| Affordable Housing Financiers | ~21.0% |
| Mid-Ticket Housing Financiers | 11.6% |
| Large Housing Financiers | 9.2% |
Strong Outlook for FY27
Equirus Securities highlights that despite ongoing global macroeconomic challenges, early data from April and May shows that healthy repayment behavior is holding steady. Channel checks point to excellent collections, even with a higher rate of loan rejections in the salaried workforce segment due to stricter vetting protocols.
Investor Takeaway: Due to a recent market de-rating (drop in stock valuations), Equirus notes that the sector currently presents an attractive entry point for investors. Fundamental metrics are pointing upward, with an increasing number of housing finance firms on track to achieve over 20% annual asset growth and a robust 15% Return on Equity (RoE) moving into the new fiscal year.
