India Mortgages Near-Term NIM Risks for HFCs; Private Banks Intensify Prime Competition

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India Mortgages Near-Term NIM Risks for HFCs; Private Banks Intensify Prime Competition

mited (PNBHF's affordable disbursement was

only 6% y/y in FY26; full-year affordable disbursements at Rs36.2bn). However, as large

HFCs lose prime mortgage market share to banks (private and PSBs alike), they are most

likely to accelerate growth in affordable housing segments. This appears consistent with

immediate growth plans at Bajaj HF, PNBHF (targeting 50% growth in affordable in

FY27; affordable + emerging mix to reach 50% of book in 2 years) and future plans at

LIC Housing (setting up a dedicated affordable vertical with external hires).

• Asset Quality is resilient: Commentary across HFCs suggests that asset quality metrics

have been holding up very well, with select HFCs highlighting flat-to-better bounce rates

in early April–May. These observations are consistent with large banks' mortgage

portfolios as well. PNBHF guided for another year of potential write-back in credit costs

(Rs2-2.5bn of recoveries), while LICHF guided for sharp improvements in asset quality

led by corporate NPA resolutions. Select HFCs flagged NRI customers (particularly

GCC-linked) as a potential risk; we disagree, as a depreciating INR is a tailwind for their

debt servicing. Almost all affordable HFCs alluded to a better April-26 vs. previous years'

April trends.

• PNB Housing is our top pick: PNB Housing Finance remains our top pick within HFCs,

while we hold a Neutral on LIC Housing Finance and UW on Bajaj Housing. PNBHF

should deliver 19-20% loan growth over FY27/28E, with ~10% EPSg (as provisions

move from write-backs to net charge). The stock is trading at 10.0x/1.14x FY28 PE/PB

for 12-13% RoE, which offers attractive risk-reward. Further, the recent credit rating