Affordable Housing Finance a compelling long-term story, says Centrum

Centrum Broking bets on Aptus and Home First Finance; the brokerage believes recent stock price corrections offering a potential entry opportunity

Affordable housing finance companies (AHFCs) continued to deliver high double-digit asset under management (AUM) growth and healthy profitability in the December quarter (Q3FY26), but the pace moderated from the strong FY23–FY25 run as disbursement momentum slows, branch productivity lags, and asset quality trends sit near the upper end of management guidance for some players. 

 

Even so, Centrum Broking believes the AHF segment remains a “compelling long-term structural story,” citing improving spreads as funding costs decline, rating upgrades, and a diversified liability profile, while maintaining Aptus Value Housing Finance and Home First Finance Company as preferred picks. 

 

While the sector is navigating a phase of consolidation amid macro uncertainty and tighter underwriting, Centrum believes the current softness in disbursements is transient. With recent stock price corrections offering a potential entry opportunity. Key monitorables include Stage 2 trends, the cost of funds trajectory, and the pace of new-branch productivity normalisation.

 

Growth moderates as disbursements lag AUM

Across AHFCs, AUM growth moderated by around 600–700 basis points (bps) in Q3FY26 to a range of 15–29 per cent, compared with the faster growth rates seen during FY23–FY25. Home First posted 25 per cent year-on-year (Y-o-Y) AUM growth versus a 33 per cent compound annual growth rate (CAGR) in FY23–25, while Aptus clocked 21 per cent Y-o-Y against a 27 per cent FY23–25 CAGR. 

 

Aavas reported 15 per cent Y-o-Y AUM growth, compared to a 20 per cent CAGR earlier. Centrum attributed the slowdown to a high base, lower branch productivity, and cautious underwriting, noting that disbursement growth for several AHFCs has also trailed AUM expansion—Aptus and Home First reported 11 per cent Y-o-Y disbursement growth in Q3, while Aavas grew 8 per cent Y-o-Y.

New-branch ramp-up emerges as key monitorable

Analysts flagged branch productivity as a key near-term variable, as many players have expanded networks over the past 18 months but new branches are taking longer to ramp up. In Aptus’ case, branches opened in the last three years account for over one-third of the network but contribute only about 12–14 per cent of AUM, implying growth is still being driven largely by mature branches. This slower scaling of newer branches, analysts said, is weighing on disbursement growth and diversification of AUM origins.

Asset quality stable, but Stage 2/3 trends in focus

Asset quality remains broadly stable, with most major AHFCs reporting Stage 3 ratios around 1–2 per cent—Aadhar at 1.5 per cent, Aavas 1.19 per cent, Aptus 1.56 per cent, Home First 2 per cent, and India Shelter 1.5 per cent. While these metrics are steady quarter-on-quarter, brokerages noted that for some lenders (including Aptus and Home First), they are close to the higher end of guidance. 

 

Stage 2 trends were mixed but generally stable: Aadhar reduced Stage 2 to 3.3 per cent, India Shelter to 3.7 per cent, while Aptus continued to carry an elevated Stage 2 book near 4.9 per cent. Credit costs moderated across the board, with Aptus improving to 60 bps, Home First to 47 bps, and Aavas further easing to 18 bps.

Spreads improve as funding costs fall

On the positive side, a lower cost of funds—helped by policy-rate cuts and rating upgrades—has supported spread expansion. Aptus continues to post industry-leading spreads of around 8.9 per cent due to high yields. Home First’s spread improved to about 5.4 per cent, while Aavas’s spread expanded to 5.34 per cent and India Shelter’s rose to 6.6 per cent. 

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