Have You Analyzed the Opportunities in Housing Finance Market?

Written by Jayant Upadhyay

Real estate is an important investment avenue for many stock and mutual fund investors. From last few years, the investors were unwilling to pour money into the market due to its stagnant growth. However, there is a positive sentiment in the market now because of constructive initiatives of government. As per ICRA report, investor sentiment was positive in FY2016-17 (45 billion + capital infusion) as compared to FY 2015-16 (26 billion capital infusion). The risk factor seems more mitigated in the coming financial year 2017-18. As per a CRISIL Report, over the next four years, affordable housing finance companies are likely to grow at a CAGR of 40%.

Credit Linked Subsidy Scheme for Middle Income Group

With an announcement of Credit Linked Subsidy Scheme for Middle Income Group People (CLSS-MIG), the housing finance sector is likely to set for a leg up. 70 lending institutions have already signed MoUs (Memorandum of Understanding) with National Housing Bank for implementation of CLSS-MIG (Source: PIB). There will be more inflow of funds in the sector because of an accorded ‘infrastructure status’ to the affordable housing segment.

Investment in Portfolios – Property, Stocks, REITS

Some of you prefer investing in physical property & stocks of real estate companies and some of you want to do an investment in REIT (Real Estate investment Trusts). At the global level, REITS has outperformed leading stock market indices over the last 1 decade.
The 5 year average for the return on REITS ranges between 7 to 16% globally. (Source: money control)

Focus on Infrastructure development & Smart Cities Mission

The government is very focused on infrastructure development as is evident from a plethora of ongoing road projects. The government is working for the widening of NH-24, which will boost the real estate market of the surrounding area. The ‘Smart Cities Mission’ will enhance the quality of life in the region. Demand for housing will scale up with facilities of better electricity & water supply, good governance, intelligent transportation systems and adequate Medicare facilities.

Abolition of Foreign Investment Promotion Board

While presenting budget 2017, the government wants to abolish the Foreign Investment promotion Board (FIPB). This will ease regulatory hurdles in attracting investments in the real estate sector. There were not being requirement of any approval from FIPB and need to pass through sectoral laws.

Falling off Interest rates

The inflation has been falling gradually through this year and owing to this RBI slashed the REPO rates. The decreased REPO rates make banks avail money at low rate of interest and as a result, lending institutions cut down the interest rate on home loans.

In India, most of the people rely on home loans to purchase a property. This finance option is open for all salaried & self-employed individuals. Even, organizations are dependent on housing loans for commercial and industrial properties.