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SBI Pushes for Housing Definition Change
State Bank of India (SBI), the country's largest lender, has called for reviewing the definition of 'affordable housing.' Chairman C S Setty stated that the average home loan size has risen to ₹51 lakh, significantly up from ₹35-40 lakh two years ago. This growing gap between actual loan sizes and the current ₹45 lakh threshold for affordable homes indicates that property costs are outpacing affordability limits. Changing this definition could affect policy benefits like priority sector lending status and tax breaks.
Stock Falls Amid Margin Pressure
Despite the proposal, SBI's stock fell sharply by 6.62% on May 8, 2026, closing at ₹1019.55 on trading volume of 48.07 million shares. This came as reports showed net interest margins (NIMs) contracted 21 basis points year-on-year in the fourth quarter of FY26. Although SBI's housing finance portfolio grew 13% in FY26 to ₹9.44 lakh crore by March 2026, this growth may not ease wider concerns about profits and asset quality in an inflationary market.
Property Costs Fuel Affordable Housing Debate
The push to redefine affordable housing fits broader real estate trends. Property prices in major Indian cities have risen 7-12% annually through 2025, with another 6-8% increase expected in 2026. The All-India House Price Index grew 3.58% year-on-year by December 2025. This rising inflation puts pressure on the affordable housing sector, leading developers to focus more on premium projects where margins are better. While SBI aims for 14% overall credit growth, higher housing costs challenge its affordable housing goals. Competitors like HDFC Bank and ICICI Bank are active in affordable housing, with ICICI Bank focusing on loans up to ₹30 lakh. Banks generally have lower funding costs than housing finance companies (HFCs). PNB Housing Finance trades at a P/E of 11.85, LIC Housing Finance at 5.60, and Aadhar Housing Finance at 20.61-21.14. SBI's P/E ratio is between 10.72 and 11.67, competitive for its sector, though potentially on the higher side for a public sector bank.
Valuation Worries and Squeezed Profits
Although SBI reported a 6% year-on-year rise in standalone net profit to ₹19,684 crore for Q4 FY26, market reactions point to investor concerns. Reports show SBI's operating profit dropped 16% year-on-year, and its net interest income (NII) decreased quarter-on-quarter. Analysts have warned about shrinking profit margins, with some calling SBI "Significantly Overvalued" on May 2, 2026, based on a GF Value™ of ₹558.59 compared to its price of ₹1068.45. The bank's focus on housing finance growth faces challenges from rising construction and land costs, which are hurting the affordable segment. New RBI regulations for HFCs and urban cooperative banks also suggest a stricter environment for housing finance.
Analyst Views and Outlook
Analysts generally rate SBI as 'Hold' or 'Buy,' with average target prices near ₹820. However, they caution about sustainable earnings growth due to ongoing margin pressures. SBI's push to redefine 'affordable housing' signals a challenging point where rising property values strain current policies. How SBI manages these rising costs, maintains its profit margins, and keeps asset quality strong in a competitive market will be key to its future performance.