Affordable housing finance companies could be set for a recovery after a subdued phase, with Kotak expecting improvement in the growth momentum in FY27.The brokerage maintained an ‘Attractive’ sector view and continued to prefer Aadhar Housing Finance, Aptus Value Housing Finance and Home First Finance.
Kotak said affordable housing finance companies have underperformed over the past six to 12 months because of slower business growth, a challenging macro environment and weak sentiment toward mid-cap stocks. “We expect growth momentum to pick up in FY2027 as low-ticket business rundown, process changes are reflected in the base and competitive intensity stabilises, following encouraging industry trends in 2HFY26. Asset quality is holding on reasonably well,” Kotak said.
Kotak on Aadhar Housing Finance: ‘Buy’
Kotak maintained a ‘Buy’ rating on Aadhar Housing Finance Ltd. with a fair value of Rs 630, implying an upside of about 27%.
The brokerage described Aadhar as the most stable play in the affordable housing finance space. It expects AUM growth of about 20% in FY27 after 20% in FY26 and 21% in FY25, while highlighting the company’s consistent business trends and medium-term return on equity of around 17%.
Kotak also expects Aadhar to benefit as lower-ticket business normalises and competitive pressures ease.
Kotak on Aptus Value Housing Finance: ‘Buy’
Kotak maintained a ‘Buy’ rating on Aptus Value Housing Finance India Ltd. with a fair value of Rs 400, implying an upside of about 48%.
The brokerage said Aptus remains the most profitable player in its coverage universe with return on equity of around 20%. It noted that the company’s loan growth guidance of 20% is lower than the 25% recorded in FY25 and 21% in FY26, leaving room for execution.
Kotak expects business momentum to improve as industry conditions recover and competitive intensity stabilises.
Kotak on Home First Finance: ‘Buy’
Kotak maintained a ‘Buy’ rating on Home First Finance Company India Ltd. with a fair value of Rs 1,530, implying an upside of about 33%.
The brokerage expects Home First to deliver AUM growth of 25% in FY27 after 25% in FY26 and 31% in FY25. It also expects disbursement growth to improve to 20% from 13% in FY26.
Kotak highlighted that loans above Rs 25 lakh accounted for 30% of incremental loan growth in FY25, reflecting the company’s gradual move toward higher-ticket lending.
Kotak on India Shelter Finance: ‘Buy’
Kotak maintained a ‘Buy’ rating on India Shelter Finance Corporation Ltd. with a fair value of Rs 975, implying an upside of about 25%.
The brokerage expects the company to deliver 26% AUM growth in FY27 after 29% in FY26. It said India Shelter’s relatively smaller balance sheet provides greater room for expansion even after the company adopted a cautious stance on disbursements during FY26.
Kotak on Aavas Financiers: ‘Add’
Kotak maintained an ‘Add’ rating on Aavas Financiers Ltd. with a fair value of Rs 1,640, implying an upside of about 12%.
The brokerage said Aavas reported 15% AUM growth in FY26 compared with 18% in FY25, while disbursement growth remained muted at 10-11% over the past two years. It expects AUM growth to improve to 17% in FY27, supported by a similar increase in disbursements.
Kotak, however, said changes in the senior management team remain a key execution risk.
Conclusion
Kotak expects affordable housing financiers to benefit from improving industry conditions. The brokerage expects affordable housing financiers under its coverage to deliver 17-26% assets under management (AUM) growth in FY27, supported by 17-20% growth in disbursements. The brokerage also said asset quality remains healthy. It expects competitive intensity to remain stable, helping preserve spreads while reducing balance-transfer outflows.
Disclaimer: The equity ratings, fair value estimates, and assets under management (AUM) growth projections outlined in this summary of Kotak’s report are intended strictly for educational and informational purposes. They do not constitute investment advice, a formal financial recommendation, or an offer or solicitation to buy, sell, or hold any security. Housing finance and lending businesses are heavily exposed to systemic interest rate cycles, liquidity tightening, credit default dynamics among low-income segments, and evolving central bank regulatory guidelines. Readers must perform independent due diligence or consult a SEBI-registered investment advisor before deploying capital.
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