Is This a Good Time to Invest in a Housing Fund?

Are you thinking of buying a new house now that the real estate sector seems to have lost its frothiness? If not you, then someone from your social circle must surely be planning to invest in a house in the near future. After all, as one of the three basic needs of human beings, shelter, or a house, is something that is on almost every person’s wish list.

Even people who already have a property to their name will not shy away from purchasing an additional house – such is the allure of real estate sector. An astute investment for the rich, and an ambitious dream for the rest of the society, the housing sector is one that has stood the test of time, despite the recent slag in prices. However, that seems to changing rapidly. Here’s why housing has become a compelling sector for investment and why you should consider the possibility.

India’s Growing Housing Opportunity

Even as housing is a basic need of the society, in India housing as a sector has been lagging since decades. While we see cityscapes dotted with houses of varied sizes and shapes, with apartment buildings towering around us, there are still millions of Indians who don’t have a house of their own.

With the growth in the economy and a sharp surge in the working populace, there has been a rapid rise in the income levels and a significant chunk of this earning power is being diverted into the housing sector.

Every day, we see new constructions being launched and new property sites being announced, indicating the potential in the sector. Further, given the recent downtrend in the sector, it stands to reason that we are now at the beginning of an uptrend, with several factors performing the role of sectoral tailwinds for the housing industry.

To begin with the real estate space has gone through a time correction starting from 2013, a phase when the gains from both lands and buildings were muted. As a result, we believe the segment is attractively priced currently. Also, the oversupply of 2008-2012 appears to be digested as can be seen from the housing demand and supply numbers in the top 7 cities in India. This is likely to lead to less pressure in real estate prices which will ultimately help the housing theme to perform better.

The recent Union Budget has also bolstered the sector with the Indian government undertaking initiatives to incentivize real estate investments and purchases. Affordable housing, under the Pradhan Mantri Awas Yojana scheme, is a pet project for the Centre, and is expected to propel housing.

Further, with the Reserve Bank of India (RBI) indicating an orientation towards growth, by maintaining repo rates at a minimum, loan rates remain at an accessible level, prompting purchase decisions. In fact, NITI Aayog recently indicated that the Indian real estate sector is likely to touch a market size of $1 trillion by 2030 and account for about 13% of the country’s GDP over the next three years.

Easiest approach to make the most of Housing them

One of the easiest ways to access this upcoming theme is by investing in a housing fund. These funds park their corpus in companies engaged in housing and allied sectors, helping you grow your wealth without actually needing to buy a property. You can begin investing with a small amount and enjoy the liquidity and flexibility offered by housing funds. For instance, if you invest INR 50 lakh in a house, you will find it difficult to liquidate the asset at a moment’s notice. However, if invested in a housing fund, you can liquidate the money quickly, making it an easy and effective way of participating in the housing opportunity without tying up your savings.

Recently, ICICI Prudential has launched a new fund by the name Housing Opportunities Fund wherein the aim is to invest in all those sectors which stand to benefit from the revival in housing theme. So, if you are an investor looking to play the uptick in housing space, this fund would emerge as a one-stop solution.

With the post pandemic positivity buoying the sector, and several tailwinds enabling a strong run over the medium term, do consider to invest in this theme and benefit from the turnaround story which may believe is already underway.

(The writer is the Managing Director, J2 Wealth & Investments, views are personal)