HDFC Housing Opportunities Fund: All You Need to Know
People have not been talking much about housing as an investment opportunity lately. In such a scenario, it may be said that the new offering by HDFC i.e. HDFC Housing Opportunities Fund has come with a theme and at a timing that seem unique, and of course, interesting. Before you get tempted to make an assumption about the scheme, read on to find out the nitty-gritty involved.
HDFC Housing Opportunities Fund (Series I) -
The primary aim of the scheme is long term capital appreciation, which it seeks to achieve by investing mainly in equity and equity linked instruments of entities that are likely to profit from growth in the housing industry and its allied business activities, or entities directly engaged in housing.
This is an amazing investment option for people looking for capital growth. This scheme is also perfect for investors seeking to invest in equity or equity linked funds for their higher return potential.
One thing that you need to keep in mind is that it’s not a scheme linked to realty or real estate funds. It is a closed-ended thematic equity fund that has around 80-85% of corpus parked in equities of housing and its allied businesses, and about 15-20% stashed in money market and debt instruments. In case of dips, derivatives may be used by the scheme for self-protection.
The scheme aims at capitalizing on all the opportunities arising from a boost in the housing industry with growing consumer demand -
A boost in the housing industry involves many sectors- electricals, building products, paints, chemicals, cement, banks and finances, steel, and also household furnishings such as certain consumer durables. Yes, there aren’t pertinent opportunities for the fund in the real estate per se, but benefits may be reaped through the sectors mentioned above. Segments like bank, cement, steel, construction and consumer durables are going to get additional boost due to planned infrastructure push, higher consumer spending and bank recapitalization.
A new benchmark called the India Housing and Allied Business Index, having a base date of 31st of March, 2017 has been set up for this fund. The index has been provided by IISL (India Index Services and Products Limited). The most important sectors in this benchmark include housing finance, banks and cement. And rebalancing of the index will be done on a half-yearly basis.
We all know that the real estate sector has been dormant for some time. But since affordable housing is getting a boost, this sector is expected to have extreme revival. It is on this revival that this scheme hinges and desires to make profits.
Below data explains ratio of EMI to post-tax income. Lower ratio indicates higher affordability; the ratio has been steadily falling since FY-12.
The following are some potential drivers you may have a look at -
- First, the government stresses on affordable housing. Under urban and rural Pradhan Mantri Awaas Yojana, the government plans to build houses on a massive scale over five years. Government shows its support to the industry by offering subsidies on interest rates to borrowers and providing tax incentives to developers. Fresh credit growth by means of home loans also make the picture pleasant.
- With interest rates on housing loans falling, and more and more banks willing to offer home loans, affordability for buying houses is growing with each passing day. Established relevant data shows that the ratio of EMI to post-tax income is consistently plummeting since 2012. Since a lower ratio indicates a higher affordability, the statement above regarding growing affordability gets reiterated.
- RERA Act makes regulations in this industry stringent, which could boost transparency. This transparency, in turn, could make buyers believe that real estate builders will now feel more obliged towards them. The Act also talks about recourse when there is a failure on the part of a developer. And such things definitely are a telltale sign that the purchasing sentiment of buyers is going to get revived.
Here Are some additional info linked to HDFC Housing Opportunities Fund (Series I) -
Srinivas Rao Ravuri is the fund manager of the scheme, the NFO period of which is 16th November 2017 to 30th November 2017. If we look at the product labelling of the scheme, we will see that it’s a high-risk scheme. And that is why it’s not an ideal option for risk averse investors. If you want to invest in this scheme, you will have to invest a minimum initial amount of INR 5000 and then in multiples of INR 10. The fund chiefly aims to achieve capital growth over a time period of 1140 days, which is the duration of the fund.