Affordable housing loans: Why ₹10-15 lakh borrowers remain the sweet spot for specialist lenders

The ₹10-15 lakh loan segment continues to be a key market for specialist affordable housing finance companies (AHFCs), even as competition intensifies from larger non-banking finance companies (NBFCs) and unlisted lenders. A Systematix Research channel check across 42 branches found that more than 60-65% of customers covered fell within this ticket-size bracket.

The findings, published on September 28, suggest that specialist lenders retain an advantage in serving borrowers with smaller loan requirements, particularly in less-formalised segments where traditional income documentation may be limited. The checks covered branches across Maharashtra, Karnataka, Tamil Nadu, Telangana and Rajasthan.

Why the ₹10-15 lakh segment matters

The segment has a significant presence of cash-salaried borrowers, particularly in Tier-2 and smaller markets. These customers may have regular employment but lack the formal income documentation typically required by mainstream lenders.

Systematix said lenders generally adopt conservative underwriting for such borrowers. Assessable income is typically capped at around ₹20,000-25,000, even when borrowers disclose higher income. Lenders may provide some flexibility for customers with longer employment histories and stable repayment records.

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Loan-to-value (LTV) ratios are also generally lower, at around 50-70%. Household income and additional income sources may be considered during assessment. Field-level verification of the borrower and workplace remains an important part of the underwriting process.

Competition is rising

The attractiveness of this market is also drawing more competitors. Systematix identified competition from unlisted AHFCs in Tier-2 and Tier-3 markets, while larger NBFCs are increasingly targeting customers with stronger credit profiles and higher ticket sizes.

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The report names Piramal Housing Finance, Cholamandalam, Tata Capital, Mahindra Finance, Tyger Home Finance, Repco Home Finance, Star Housing Finance and Finova Finance among lenders competing across different markets.

For specialist lenders, therefore, maintaining their advantage will depend not only on pricing but also on their ability to assess informal-income customers and process loans quickly.

Branch expansion becomes important

Systematix also found that growth is becoming harder for mature branches. Branches with more than ₹50-60 crore of assets under management (AUM), or those operating for more than five years, are increasingly seeing growth stagnation as existing catchments become more penetrated and competition increases.

This makes expansion into new geographies and continued branch additions important for sustaining growth.

At the same time, lenders are placing greater emphasis on direct sourcing and connectors rather than relying entirely on corporate direct-selling agents. Faster turnaround time, field-based underwriting and customer retention are becoming important competitive factors.

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Demand outlook remains positive

Despite some seasonal disruption caused by the monsoon and an inauspicious period, Systematix's branch checks indicated expectations of a 3-7% quarter-on-quarter improvement in disbursements across several markets. The brokerage said monthly disbursement momentum remained healthy, suggesting recent weakness was more timing-related than structural.

Systematix retained its estimates and target prices for the AHFCs under coverage following the checks. The report said its findings broadly validated its earlier sector thesis, while highlighting competition, branch maturity and employee attrition as factors lenders will need to manage as they pursue growth.

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