Kotak has projected that affordable housing finance firms will begin to regain growth in FY27 after a period of subdued expansion. The research note attributed the prospective recovery to improvements in household income, continued policy support for affordable supply and a normalisation of lending spreads. It observed that builders are likely to complete delayed projects which will release inventory and support loan growth. The firm also highlighted that enhanced underwriting and targeted product design have strengthened originations. However, Kotak cautioned that several macroeconomic headwinds could complicate the recovery path. Elevated interest rates, persistent inflation and a tightening of global liquidity were listed as principal risks that could weigh on affordability and borrower demand. The note pointed to potential deterioration in asset quality if unemployment rises or if growth softens and emphasised that volatility in financial markets could increase funding costs for smaller lenders. It recommended close monitoring of systemic liquidity and policy responses. Lenders are expected to prioritise balance sheet resilience while seeking to capture the recovery in affordable segments. Actions noted include tighter credit adjudication for riskier cohorts, a focus on secured lending and an emphasis on cost optimisation through technology and process efficiencies. Kotak suggested that firms with diversified funding sources and higher retail franchise strength would be better placed to expand lending when demand picks up. Product innovation targeted at middle income households was seen as a durable growth lever. Overall, the outlook for affordable housing finance is constructive conditional on macro stability and continued policy facilitation, Kotak concluded. The pace of recovery will depend on how quickly interest rate pressures ease and on sustained improvements in household incomes and employment. Investors and regulators were urged to watch key indicators such as loan growth trends, non performing assets and wholesale funding spreads. The research recommended cautious optimism pending clearer signs of macro stabilisation.