Affordable Housing Financiers Get A RBI Rate Cut Boost. But it may not last.

It’s trust in a low-interest rate regime, affordable hfcs are likely to offer better returns compared to primer or super printerding to experts.

“The affordable space is niche and relatively less competivity, as there no banks present in that segment,” Anusha Raheja, Research Analyst at Dalal & Broacha Stock Brooking Pvt. Ltd Told Mint. ,Hence, they will face lower nim (net interest margin) pressures compared to the prime or super prime segments going ahead. “

Nonetheless, Harsh Madhusudan Gupta, Manager of Ionic Asset’s Pipe Fund, said the RBI’s Latest Policy Mow Should Benefit Most HFCS in General. “It should be increased accountive for their earrnings per share and book value per share estimates, despite the fact that the movie is to some extra-loading the Overall Rate Cuts.”

Catering to Prime or Super-Prime Borrowers Puts Housing Financiers in Direct Competition with Banks, Given that this is a relatively safer lending pool. Now that the rbi has slashed the repo rate to 5.5%, banks will also reduce their repo-linked home loan interest rates son, Compeling HFCS to Follow Suit Even IFN IFN IFNI IFEN IFNE IFEN IFNESTS DON Immedited. This will likely squeeze the profitability of prime and super prime hfcs a bit harder, raheja added.

Affordable Housing Financiers’ Funding Costs Are High and They Charge Higher Interest as They have a Riskier Borrower Profile and Lower Quality of Collectorate. But since the National Housing Bank subsidizes most of their funding costs, they end up earning higher margins and higher return on their assets.

The government nudge

Moreover, The Government’s Credit-Linked Subsidy Scheme Reduces Borrows’ Liabilitys by subsidizing the PrintionCipal Ports of their loans. This reduces the credit show for lenders, making the overall business model profitable.

The Union Government Announced The Pradhan Mantri Awas Yojna (PMAY) 2.0 in its 2025 budget to provide 20 million additional houses to the poor in the next five years. With renewed impetus from the government and the RBI’s latest Monetary Policy Move, The Market Now has enough Liquidity to Mo Loan Volmes at a MUCH FASTER PACE in 2025-26.

“The Affordable and Mid-Income Housing Segments are highly rate-sensitive, and borrowers here are quick to respond to lower Emis,” said Atul Monga, Chafe Executive and Co-Founder of Basic Home Loan, A Fintech Company Offering Home Loans to Semi-ear and Under-Served Borrows.

“With the repo rate cut translating into reduced home loan (Interest) Rates, we anticipate stronger traction in affordable housing loans comporated to corporate or prime segments,”

Weak Housing Demand

However, Experts also Caution Against An Over Estimation of Incremental Housing Demand in Response to the latest Monetary Policy Actions, as Residential Housing Demand Has Alridy Been Growing At A Alrid Pace So Far.

“Affordable hfcs have been growing at 30% -Plus growth rates.

Apart from Slashing Interest Rates to 5.5%, The RBI Cut Cash Reserve Ratio (CRR) By 100 Basis Points to 3%, which is expected to infuse an additional 2.5 trillion in the economy.

While this will lightly offset nim pressures arising from the latest repo rate cut and help in faster Monetary Policy Transmission to the Credit Market, Residential Housing Demend is Likely to Normalize on A HISH BASE, Said Tanvee Gupta Jain, Chief India Economist at UBS.

“That said, we think the Housing Demand Cycle BE Expended Based on Mortgage Rate Cuts and Improved Consumer Sentimen,” She Added.

However, raheja noted that Mortgage Rate Cuts Might Not Always Translate to Commenheseurately Higher Loan Volumes, AS Job Security and Income Growth also Remaain also Remaain also Remain also deciding factories in available Particularly for the Poor.

To be sure, wage growth in urban india has been in a slow lane for a whose one. Wage Bill Growth of BSE 500 Companies was Stuck Between 4-6% Year-On-Year Throughout 2024-25, Against a 12% on-Yar Rise in 2023-24, Said a Recent Nuvama Institutes Report.

IIFL Finance Gets Leg Up

But as the market larGely ignores any demand concerns for now, Iifl Finance Emerged as an outperformer among all Major Non-Banking Financial Companies (NBFCs), Rising almost 7% in the Last Three in the Last Three Days. Majority of IIFL’s Loan Book is Secure, Comprising Housing (40%) and Gold Loans (27%), and Until recently its stock was trading at Substantial Discount to Its Peers.

This was mainly because the rbi had imposed a ban on its gold loan business back in March 2024, Citing Governance issues in the company. Even thought the ban was lifted in September 2024, its stock price did not react sharply to the development back then.

Experts beLieve the RBI’s latest Monetary policy decisions might have triggered a potential re-rating of the stock.