Global brokerage firm Bernstein has issued an optimistic outlook for the affordable housing finance sector, projecting a potential upside of up to 34% for several key stocks. The firm believes the segment is emerging from a period of moderation, driven by improving business momentum, healthier asset quality, and attractive valuations.
Key Stocks and Potential Upside
- Home First Finance: Bernstein has set a target price of Rs 1,450, implying the highest potential gain of nearly 34%.
- Aadhar Housing Finance: A target of Rs 610 suggests an upside of close to 29%.
- Aptus Value Housing Finance: Valued at Rs 340, indicating gains of around 30%.
- Aavas Financiers: Expected to see a more modest upside of about 5%, with a target price of Rs 1,440.
- PNB Housing Finance: Assigned a target of Rs 960, implying limited downside from current levels.
Sector Turnaround and Growth Drivers
According to Bernstein, the affordable housing finance segment is showing early signs of a significant turnaround. The sector had previously faced pressure due to macroeconomic uncertainty and stress within the microfinance ecosystem. However, recent trends indicate a robust recovery.
The March quarter performance notably reflected stronger operational momentum across the sector. This included improved loan growth, stabilizing business conditions, and a continued easing of concerns regarding asset quality. Fears surrounding intense competition and borrower stress, which previously weighed on investor sentiment, are now subsiding as sector fundamentals gradually recover.
Rebounding Disbursement Growth
Bernstein forecasts a meaningful rebound in disbursement growth, particularly during the fourth quarter of FY26. After a sharp slowdown in the first half of the fiscal year, largely attributed to broader economic uncertainty and spillover effects from the microfinance stress cycle, growth trends have improved considerably.
Aggregate disbursement growth across affordable housing finance companies accelerated to 16% year-on-year in Q4FY26, a significant jump from just 8% in the previous quarter. Most major players contributed to this recovery, helping to stabilize assets-under-management growth despite seasonally elevated loan run-offs. Importantly, balance transfer activity remained stable, suggesting that competitive intensity within the sector has not worsened materially.
This positive assessment from Bernstein underscores a renewed confidence in the affordable housing finance sector's ability to deliver strong performance in the coming period.