Union Budget 2026: Impact Analysis on Home First Finance Company (HOMEFIRST)

The Union Budget 2026, presented by Finance Minister Nirmala Sitharaman, has laid a robust foundation for the housing finance sector, particularly for players like Home First Finance Company India Ltd (HOMEFIRST). With a renewed focus on urban development, infrastructure spending, and the formalization of the economy through the 'Reform Express,' the budget provides several tailwinds for the affordable housing segment. As a technology-driven lender focused on first-time homebuyers in low and middle-income segments, HomeFirst stands to benefit from the structural shifts proposed in the fiscal roadmap for 2026-27.

Massive Infrastructure Outlay to Drive Housing Demand

The government has proposed a significant increase in public capital expenditure, raising the allocation to ₹12.2 lakh crore for FY 2026-27. This 9% increase from the previous year’s ₹11.2 lakh crore is expected to stimulate economic activity across the country. For HomeFirst, which operates primarily in urbanized regions of Gujarat, Maharashtra, and Tamil Nadu, this infrastructure push translates into better connectivity and the emergence of new residential clusters. Improved transport and utility infrastructure often lead to the development of affordable housing projects on the outskirts of major cities, which is the core target market for the company.

City Economic Regions (CER) and Tier 2/3 Focus

A standout feature of Budget 2026 is the focus on Tier 2 and Tier 3 cities, which the government identifies as the new engines of growth. The proposal to develop 'City Economic Regions' (CER) with an allocation of ₹5,000 crore per CER over five years is a direct positive for HomeFirst. Since the company has been aggressively expanding its branch network—reaching 165 branches as of December 2025—its presence in these emerging growth centers aligns perfectly with the government's urban development strategy. The CER initiative aims to map growth drivers and provide modern infrastructure, which will likely increase property values and demand for housing credit in these regions.

Impact of the New Income Tax Act 2025

The announcement that the Income Tax Act 2025 will come into effect on April 1, 2026, aims to simplify compliance and provide ease of living for ordinary citizens. By redesigning forms and simplifying rules, the government is making it easier for the salaried and self-employed segments—who make up the bulk of HomeFirst’s customer base—to manage their finances. Increased clarity in taxation and the potential for higher disposable income under a simplified regime could improve the creditworthiness of first-time homebuyers, potentially reducing the 'New to Credit' risk that HomeFirst manages.

Vision for NBFCs and Liquidity Management

The Finance Minister outlined a 'Vision for NBFCs for Vikashit Bharat,' which includes clear targets for credit disbursement. This regulatory clarity is expected to improve the standing of well-capitalized NBFCs and Housing Finance Companies (HFCs) in the capital markets. HomeFirst, with a Capital Adequacy Ratio (CRAR) of 49.0% as of Q3 FY26, is well-positioned to leverage this vision. Furthermore, the budget’s focus on maintaining fiscal discipline, with a fiscal deficit target aimed at reaching a debt-to-GDP ratio of 50% by 2030-31, suggests a stable interest rate environment. This stability is crucial for HomeFirst to maintain its healthy Net Interest Margins (NIM), which stood at 6% in the December 2025 quarter.

Digital Infrastructure as a Force Multiplier

HomeFirst has always been a technology-first lender, with 83% of approvals facilitated by the account aggregator framework. The Budget 2026's emphasis on 'cutting-edge technologies including AI' as force multipliers for governance and the financial sector reinforces HomeFirst’s operational model. The government's push for digital public infrastructure and the 'Bharat Vistar' AI tool for agricultural resources indicates a broader trend toward data-driven decision-making, which supports HomeFirst’s strategy of using technology to underwrite loans for customers with informal income streams.

MSME Support and Indirect Benefits

The budget proposed a three-pronged approach to support MSMEs, including a ₹10,000 crore SME growth fund and liquidity support through TREADS. Many of HomeFirst’s self-employed customers are either MSME owners or employees in these sectors. Strengthening the MSME ecosystem directly impacts the income stability of these borrowers, thereby improving asset quality and reducing delinquency risks. The company’s Gross Stage 3 assets stood at 2.0% in Q3 FY26, and a healthier MSME sector could help in bringing this number down.

Financial Summary and Budgetary Outlook

Market Sentiment and Analyst View

Market analysts view the Budget 2026 as a 'growth-oriented' document that avoids populism in favor of structural reforms. For HomeFirst, the lack of dramatic changes in housing tax incentives is offset by the massive commitment to urban infrastructure. The stock, which has shown a 52-week high of ₹1,519, remains a favorite for investors looking for exposure to the affordable housing theme. The management’s guidance of 25% AUM growth for FY27 appears achievable given the budgetary support for urban expansion and the formalization of the workforce through new labor codes.

Conclusion

Union Budget 2026 provides a stable and supportive environment for Home First Finance Company. The combination of increased infrastructure spending, a dedicated focus on Tier 2/3 cities through City Economic Regions, and a simplified tax regime creates a fertile ground for affordable housing growth. While the company must navigate the transition to new labor codes and the new tax act, its strong capital base and technology-driven approach position it to capitalize on the government's vision of 'Vikasit Bharat.' Investors should monitor the implementation of the CER initiatives and the movement in borrowing costs as the primary indicators of future performance.