Systematix Research has initiated coverage on five affordable housing finance companies—Home First Finance, Aptus Value Housing Finance, Aavas Financiers, Aadhar Housing Finance and India Shelter Finance—with ‘Buy’ ratings.Based on their August 28 closing prices, the brokerage sees potential upside ranging from 28% to 48%, with Aptus offering the highest return opportunity.Systematix expects affordable housing financiers to benefit from India’s low mortgage penetration, rising incomes, urbanisation and growing demand from self-employed and semi-formal borrowers. Mortgage credit accounted for just 12% of GDP in FY25, while loans below Rs 35 lakh still represented about 82% of housing-loan volumes.The brokerage expects most companies under its coverage to deliver loan growth in the low-to-mid-20% range and profit growth of 18-23% through FY29.Home First FinanceSystematix has assigned a Buy rating on Home First Finance with a target price of Rs 1,570, implying a 31% upside from the current market price of Rs 1,200.The brokerage sees operating productivity as Home First’s key advantage. Its centralised underwriting, common sales and collection systems, technology-led processes and relatively light branch network allow it to grow without a proportionate increase in costs.Systematix expects assets under management to grow at a 24% CAGR between FY26 and FY29, while earnings per share could increase at a 21% CAGR. Average return on assets and return on equity are estimated at 3.8% and 15.3%, respectively.Increasing competition from banks and the transfer of loans to rival lenders remain key factors to monitor. However, Systematix believes Home First’s customer-acquisition capabilities and assessed-income underwriting expertise should support healthy growth.Aptus Value HousingSystematix has a target price of Rs 380 for Aptus, implying a 48% upside from the current market price of Rs 256.Aptus has the strongest return profile in the coverage universe, supported by its exposure to higher-yielding housing, loan-against-property and small-business loans. Non-housing products generate yields of about 17-20%, compared with 14-14.5% for housing loans.This diversified portfolio is expected to support an average net interest margin of about 10%, return on assets of 7.5% and return on equity of 20.5%.Systematix forecasts AUM and EPS CAGRs of 22% and 18%, respectively, through FY29. Growth is expected to recover as Aptus expands into western India and deepens its presence in southern markets. Geographic concentration in the South and rising competition remain key risks.Aavas FinanciersSystematix has a target price of Rs 1,700 for Aavas Financiers, implying a 32% upside from the current market price of Rs 1,289.The brokerage views Aavas as a growth-recovery opportunity rather than a turnaround. The company has entered a more stable phase following CVC Capital Partners’ emergence as its sole promoter and the appointment of Manu Singh as managing director and chief executive officer.Systematix expects improvements in customer selection, sourcing, branch productivity and regional execution to revive growth. Expansion into Andhra Pradesh and Telangana, along with a greater focus on salaried and small-ticket housing customers, should provide additional support.Aavas’ asset quality remains its biggest strength, despite its exposure to self-employed borrowers and smaller markets. Systematix forecasts AUM and EPS CAGRs of 19% and 16%, respectively, through FY29, with average return on assets of 3.4% and return on equity of 14.6%.Aadhar Housing FinanceSystematix sees Aadhar Housing Finance as a strong play on India’s affordable housing opportunity, with a target price of Rs 600, implying a 28% upside from the current market price of Rs 470.The brokerage views Aadhar as the broadest listed proxy for India’s affordable housing finance market. It is the largest listed company in the segment and operates 628 branches across 22 states, with no single state contributing more than 15% of AUM.Its diversified presence reduces regional risk, while growing exposure to emerging markets provides a longer growth runway and better yields. Loans originated in emerging markets carry yields of about 15%, compared with 11.8% in urban markets.Systematix expects AUM to grow at a 20% CAGR and EPS at a 21% CAGR through FY29. Average return on assets and return on equity are projected at 4.4% and 16.4%, respectively. Branch expansion, technology adoption and improving productivity should support further earnings growth.India Shelter FinanceSystematix has a target price of Rs 880 for India Shelter Finance, implying a 35% upside from the current market price of Rs 650.India Shelter offers the strongest structural growth profile among the five companies, supported by its focus on smaller loans and underserved Tier-II and Tier-III markets. About 73% of its loans are below Rs 15 lakh, giving it access to borrowers who may not meet the lending criteria of banks and larger housing financiers.The company operates across 15 states and sources loans largely through its in-house network, giving it greater control over customer acquisition and underwriting. Its higher exposure to loan-against-property also supports a portfolio yield of about 15%.Systematix forecasts AUM and EPS CAGRs of 26% and 23%, respectively, through FY29, with average return on assets of about 5.5%. The brokerage said competition, margin pressure and the execution of rapid expansion would be important factors to watch.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)