Affordable Housing Finance Companies (AHFCs) are expected to maintain strong growth momentum in FY2027, supported by rising demand from underserved borrowers, deeper penetration into tier-II and tier-III markets, and continued formalisation of credit.
According to CareEdge Ratings, the AHFC sector recorded 18% growth in assets under management (AUM) during FY2026. The sector is now expected to grow by another 19% in FY2027, while maintaining healthy profitability and comfortable asset quality.
AHFCs have also strengthened their position within India’s broader housing finance ecosystem. Their share in the overall housing finance industry increased to nearly 20% in FY2026, compared with 12% in FY2022. During the same period, sector AUM grew at a compound annual growth rate (CAGR) of 27% to reach approximately ₹2.2 lakh crore.
Housing and Non-Housing Loans Support Growth
Growth remained broad-based during FY2026. Housing loans (HL) increased by 17%, while non-housing loans (NHL) recorded stronger growth of 22%.
Non-housing loans are expected to continue growing faster in FY2027. This trend is being supported by rising demand for property-backed credit for business requirements, home improvement, and other financing needs.
As a result, both housing and non-housing segments are expected to contribute to the sector’s projected 19% AUM growth in FY2027.
Profitability Remains Healthy
Despite higher operating expenses, AHFCs maintained a strong earnings profile during FY2026.
Operating expenses increased to around 3.6% in FY2026, compared with 3.2% in FY2023. The increase was mainly linked to branch expansion, technology investments, and efforts to strengthen distribution capabilities.
However, healthy net interest margins and controlled credit costs supported profitability. The sector reported an average Return on Total Assets (RoTA) of 3.8% in FY2026, improving from 3.4% in FY2025.
CareEdge Ratings expects profitability to remain healthy in FY2027, with RoTA projected at around 3.5%. While competition is expected to increase, strong demand and controlled credit costs should continue to support earnings.
Asset Quality Remains Comfortable
Asset quality continues to be one of the key strengths of the AHFC sector.
Gross Non-Performing Assets (GNPA) stood at approximately 1.6% as of March 2026, unchanged from March 2025. CareEdge Ratings expects GNPA to remain at comfortable levels, although the portfolio is gradually seasoning.
For March 2027, GNPA is projected at around 1.7%.
Prudent underwriting practices and adequate provisioning buffers are expected to help AHFCs manage potential credit risks. Conservative leverage also provides additional comfort.
As of March 31, 2026, on-book gearing stood at approximately 2.5 times, while managed gearing was around 3.1 times.
Banks Remain Key Source of Funding
Banks continue to be the dominant source of funding for AHFCs. Term loans and direct assignment transactions remain important components of the sector’s funding profile.
At the same time, AHFCs are increasingly exploring off-book funding structures. NHB refinance also continues to complement bank funding.
To support the expected growth trajectory, CareEdge Ratings estimates that AHFCs will require approximately ₹25,000 crore of incremental debt funding during FY2027, excluding refinancing requirements.
Stable access to funding is therefore expected to remain an important factor in sustaining sector growth.
Regulatory Changes Focus on Customer Protection
The housing finance sector, including AHFCs, has also witnessed changes in regulatory guidelines in recent years.
These include operational guidelines related to recovery practices and realisation-based interest charging for borrowers. The measures are customer-centric and aim to strengthen fair practices across the sector.
For AHFCs, stronger regulatory frameworks are expected to support responsible lending while improving customer confidence.
CareEdge Ratings Highlights FY27 Outlook
CareEdge Ratings presented its sector outlook during its webinar titled “Affordable Housing Finance: Growth, Asset Quality and the Road Ahead.”
The webinar brought together senior industry leaders and stakeholders to discuss the changing affordable housing finance landscape, growth opportunities, asset quality, profitability, funding requirements, and the outlook for FY2027.
The key FY2027 projections include:
- AUM growth: 19%
- GNPA: 1.7%
- RoTA: 3.5%
- Credit cost / ATA: 0.5%
- Gearing: 2.7 times
For comparison, FY2026 recorded AUM growth of 18%, GNPA of 1.6%, RoTA of 3.8%, credit cost/ATA of 0.4%, and gearing of 2.5 times.
Strong Demand to Drive the Next Growth Phase
AHFCs are benefiting from several structural growth drivers. Rising demand from underserved borrower segments remains a key factor. In addition, increased formalisation of credit is helping expand access to organised housing finance.
Deeper penetration into tier-II and tier-III markets is creating further opportunities. Favourable policy support is also strengthening the sector’s long-term growth prospects.
Moreover, the continued demand for property-backed loans is expected to support the faster expansion of non-housing finance.
AHFC Sector Outlook Remains Positive
Overall, CareEdge Ratings expects AHFCs to combine strong growth with financial stability in FY2027.
The sector is projected to deliver 19% AUM growth, while GNPA is expected to remain manageable at around 1.7%. Profitability should remain healthy, with RoTA estimated at 3.5%.
Although operating costs and competitive intensity may rise, healthy demand, prudent underwriting, adequate provisioning, and stable funding access are expected to provide support.
With AUM already reaching around ₹2.2 lakh crore and the sector’s market share approaching 20%, AHFCs are becoming an increasingly important part of India’s housing finance ecosystem.
The outlook suggests that affordable housing finance companies are well positioned for their next phase of expansion, provided they maintain disciplined growth, prudent risk management, and strong customer-focused lending practices.
