India’s second-largest fund house ICICI Mutual Fund has rolled out ICICI Prudential Housing Opportunities Fund. The schemes will invest in beneficiary companies from the Housing space. The housing theme encapsulates various sectors like cement, consumer electronics, housing finance, banks, power, steel, gas suppliers (CNG, PNG), paints and so on. This is the second offering from any fund house in India. Before this, HDFC Mutual Fund launched HDFC Housing Opportunities Fund in December 2017.
The Investment Rational
Fund house believes that housing as a theme seems to be poised for a turnaround as the real estate oversupply of 2008-2012 appears to be digested. This may lead to less pressure on real estate prices, thereby aiding housing as a theme to perform better. The another trigger point for launching this scheme is optimistic numbers thrown in All India Debt & Investment Surveys. According to the survey, the number of Indians living in urban areas is expected to reach 525 million by 2025 and 600 million by 2036, Real Estate sector in India is expected to reach USD $1 trillion by 2030. The early signs of this are visible in the healthy growth of housing sales volume (across seven major cities), which surged 113 per cent YoY, signifying healthy recovery post lockdown. Furthermore, the residential sector is expected to receive a boost under the Pradhan Mantri Awas Yojana (PMAY) scheme. Also, the segment is an attractively valued post going through a time correction since 2013.
“Housing as a theme is at the cusp of a strong cycle. India’s favourable demographics, growing middle-class population, increased urbanization, better affordability and lower home loan interest rates are creating a conducive environment for housing and allied themes. Moreover, the Government has been trying to stimulate activity in the sector through various supportive measures like affordable housing, affordable rental housing complex (ARCH) scheme” Says Chintan Haria, head - product development and strategy, ICICI Prudential MF. He also adds that India, one of the fastest-growing economies, should see strong demand for housing as seen historically in other developed economies.
OLM Take
The scheme has a narrow investment objective and falls under the thematic category. The fund future will rely predominantly on the growth prospects of the housing sector. Any slump in economic activity can affect the future growth of the theme and, ultimately, your investments. If you have a large stomach for risk and are bullish on the growth prospects of the housing sector, you may like to consider investing in this fund or give it a miss.
The existing scheme from this space, HDFC Housing Opportunities Fund, do not come with an impressive track record. The fund has underperformed broadly tracked index S&P BSE 500 in the last one and three years. The scheme has delivered 8.95 per cent returns in the last three years, whereas S&P BSE 500 has given 17.16 per cent for the same period as on March 27, 2022.
