Affordable housing finance companies may need to expand into new catchments as mature branches experience stagnating growth and competition increases across smaller cities and higher-ticket loan segments, according to a Systematix Research report. The assessment was based on 42 branch-level interactions and checks across Maharashtra, Karnataka, Tamil Nadu, Telangana and Rajasthan.

Branches with assets under management of Rs. 500-600 mn are increasingly seeing growth slow as their existing catchments become more penetrated. The report indicated that lenders will need to continue adding branches and entering newer markets to sustain expansion, rather than relying only on productivity improvements from established outlets.

Demand remains healthy, with channel checks indicating a potential 3 to 7 per cent quarter-on-quarter improvement in disbursements across several markets. Monthly trends suggested that recent weakness was linked more to seasonality than a structural slowdown, while monsoon disruptions and an inauspicious period delayed transactions in some locations.

Specialist lenders retain an advantage in the lower-ticket segment. More than 60 to 65 per cent of customers covered in the checks fell within the Rs. 1-1.5 mn ticket range. Cash-salaried borrowers account for a meaningful share of customers in Tier-2 and smaller markets, making field-based income and employment verification important. Competition is rising from unlisted affordable housing finance companies in Tier-2 and Tier-3 markets and from larger non-banking financial companies at higher ticket sizes.

Higher top-up offers, rather than pricing alone, were identified as a key reason for balance transfers. Employee attrition is also creating pressure, with departing sales staff potentially taking 10 to 15 per cent of their customer pool, while new employees require time to build sourcing relationships and reach full productivity. Collection trends improved in the second quarter across several markets, with reported defaults and non-performing assets generally below 2 per cent in the branches covered. The report concluded that new catchments, stronger sourcing and faster execution will shape lenders’ growth as competition intensifies.