Affordable housing king might be staging a comeback—but it’s not Bajaj Housing
Subscribe to enjoy similar stories. The listing of Bajaj Housing Finance has energized the housing finance sector. Or was it the other way around? The listing’s success reflects the strong performance of housing finance overall.
A robust quarter-on-quarter (QoQ) growth of 7.9% (28.7% annualized) in home loans outstanding supports this trend, and expected rate cuts are likely to further boost growth. As a result, most listed housing finance companies have seen a significant re-rating in their price-to-book (P/B) ratios, a common valuation metric for banks, NBFCs, and financials. Of the 15 largest listed housing finance companies, 13 have experienced a P/B re-rating—evidence that the market is recognizing the sector’s improving prospects.
However, housing finance companies (HFCs) differ significantly across the broader market, which includes banks, non-banking finance companies (NBFCs), and HFCs. These players compete based on ticket size (sub ₹25 lakh, ₹25-50 lakh, and ₹50 lakh+), funding costs, risk assessment abilities, and other key factors. For instance, while banks benefit from lower funding costs, they are not always efficient in servicing all segments, such as affordable housing loans.
For this discussion, we'll adopt the National Housing Bank (NHB) definition of affordable housing, which classifies any housing loan under ₹25 lakh as affordable. Aavas Financiers is the undisputed leader in this segment, though the last two years have been tough. However, the worst seems to be behind the company, positioning it for a turnaround.
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