HDFC Housing Opportunities Fund - May, 2021
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
HDFC Housing
Opportunities Fund
An open ended equity scheme following housing and allied activities theme
May 2021
This product is suitable for investors who are seeking*:
• Capital appreciation over long term/regular income
• Investment predominantly in equity and equity related instruments of entities engaged in and/
or expected to benefit from the growth in housing and its allied business activities
*Investors should consult their financial advisers, if in doubt about whether the product is suitable for
them. Investors understand that their principal will be at
For latest Riskometer, investors may refer to the Monthly Portfolios disclosed on the website of the Fund very high risk
viz. www.hdfcfund.com 1
The Housing Market –
The Way Forward
2
Housing & Allied Sectors – The Way Forward
Several factors bode well for housing & allied sector in India, including:
An uptick in activity in the housing; allied sectors is also likely to recover
(Page number 4)
Increasing affordability – the highest in last 25 years (Page number 5)
Low interest rates have reduced the spread between EMIs and rents
(Page number 6)
Increased liquidity and low interest rates have resulted in negative real interest
rates (Page number 7)
Housing demand has seen an improvement in recent past evidenced from the
increase in outstanding home loans (Page number 8)
Several measures by Government and RBI are expected to drive growth in the
sector (Page number 9)
Stimulus measures by State Governments boosting demand (Page number 10)
Recovery in housing sector may also drive growth in allied sectors dependent on
it (Page number 11)
The Government’s strong push for a recovery in manufacturing and the continued
growth of IT sector may increase the demand for housing (Page number 12 ,13 & 14)
India’s long term growth drivers remain intact (Page number 15)
3
An uptick in activity
Sales & Launches of housing units in India
01 The measures by the 02 Sales and Launches in 70000
Government & RBI to residential units have 60000
50000
infuse liquidity into grown by 44% and 40000
the system and lower 38% respectively in Q4 30000
20000
interest rates has FY2020-21, compared 10000
increased activity in to Q4 FY2019-20 0
Q4 FY20 Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21
the housing sector Sales (no. of housing units) Launches (no of housing units)
03 Transactions in 04 Up to 190 stuck Transactions/New Completions of
commercial real projects (launched in commercial real estate in 2020
estate have grown by 2013 or before) 20
81% and 272% Q-o-Q accounting for 15
10
in Q3 & Q4 of CY 2020 approx. 73,560 units 5
respectively have been completed 0
in 2020 Q1 Q2 Q3 Q4
Transactions (million sq. ft.) New Completions (million sq. ft.)
Source: Knight Frank
4
Improving affordability
Improvement in income
levels, lower interest rates,
fiscal incentives, etc. has
improved affordability of
residential housing to an
all time high
This bodes well for
housing demand over
the medium term
Source: HDFC Ltd. Presentation - Feb-21
5
Reduced spread between EMIs and rent
11.0 Home loan rates (%)
10.5
10.0
9.5
9.0
8.5
8.0
7.5
7.0
6.5
6.0
Aug-12
Aug-13
Aug-14
Aug-15
Aug-16
Aug-17
Aug-18
Aug-19
Aug-20
Dec-12
Dec-13
Dec-14
Dec-15
Dec-16
Dec-17
Dec-18
Dec-19
Dec-20
Apr-13
Apr-14
Apr-15
Apr-16
Apr-17
Apr-18
Apr-19
Apr-20
Apr-21
Source: Kotak Institutional Equities
Indian home loan rates are near decadal low, driven by ample liquidity
and fall in yields (see chart)
Falling interest rates and stable rentals have reduced the spread
between EMIs and rent paid
Reduced spread can incentivize people staying on rent to own a house
6
Negative Real Rates
Real rates (1 year Gsec yield minus CPI) (%)
6
4
2
0
-2
-4
-6
Aug-16
Aug-17
Aug-18
Aug-19
Aug-20
Dec-16
Dec-17
Dec-18
Dec-19
Dec-20
Feb-21
Feb-17
Feb-18
Feb-19
Feb-20
Jun-16
Jun-17
Jun-18
Jun-19
Jun-20
Oct-16
Oct-17
Oct-18
Oct-19
Oct-20
Apr-21
Apr-16
Apr-17
Apr-18
Apr-19
Apr-20
Source: Bloomberg
Falling interest rates & surplus liquidity has resulted in negative real
rates in India when compared with CPI Inflation
This could be an ideal environment for borrowers and could support
housing recovery
7
Home loan traction improving post COVID
Q-o-Q increase in Outstanding Home Loan (INR in crores)
70,000
60,000
50,000
40,000
30,000
20,000
10,000
18
18
18
18
19
19
19
19
20
20
21
21
20
20
21
21
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
3Q
4Q
1Q
2Q
Source: HDFC Ltd, SBI, ICICI Bank and Axis Bank
COVID led lockdown impacted the real estate/housing sector significantly.
However with easing of restriction post 1st wave, the housing demand has seen
sharp improvement which is evident from the increase in home loans
outstanding for Top 4 lenders in the space
Second COVID-19 wave is likely to have temporary impact on growth trajectory.
8
Government/RBI measures to push housing demand
The Indian real estate sector is an important sector which employs over 50 million
people and is expected to contribute 13% of GDP by 2023
Central & State Governments, therefore, have taken several steps to help the sector
Under its flagship scheme, Pradhan mantri Awas Yojana (PMAY) – Housing for all, 2022
– the Central Government has set a target of completing 1.12 crore houses in urban
areas by 2022.
Out of these, 1.09 crore houses have already been sanctioned
Under the Atal Mission for Rejuvenation and Urban Transformation (AMRUT),
Government has targeted provision of 1.39 crore water taps and 1.45 crore sewage
connections by 2023
Of these, 93 lakh water taps and 59 lakh sewer connections have been already
provided
Providing incentives to developers for affordable housing and according infrastructure
status to affordable housing sector
Rationalization of risk weights of individual housing loans extended by banks
irrespective of the amount of housing loan, which can push the flow of credit to the real
estate sector
Making real estate loans eligible under the ‘stressed category’ for credit guarantee and
allowing one time restructuring of developer loans
9
Some State Governments stimulus measures
Reduction in stamp duty:
Maharashtra - Reduced stamp duty from 5% to 2% in August,
2020, up to December 31, 2020, and then to 3% up to March 31, Registration of property sales in Maharashtra
2020 (Trailing 3-month average trend)
Karnataka - reduced to 3% from 5% for properties costing less
than INR 20 lakh 200000
Stamp duty cut
180000
In January, 2020, the Maharashtra Government cut the real estate 160000
140000
premium by half till December 31, 2021, and includes concessions on 120000
premiums levied by planning authorities and local administrations 100000
80000
for granting more Floor Space Index (FSI) 60000
40000
20000
Steps taken by the Gujarat Government, including – 0
Jan-20
Mar-20
Apr-20
May-20
Oct-20
Nov-20
Feb-20
Dec-20
Jun-20
Jul-20
Aug-20
Sep-20
Jan-21
Mar-21
Apr-21
Feb-21
Allowing acquisition of agricultural land for affordable housing
Increasing carpet area limit from 80 sq mt to 90 sq mt to
qualify as affordable housing
Source: IGR Maharashtra
Interest relief on payment of chargeable FSI
Recent moderation in registration is due to emergence of Second
wave of COVID-19 during April 2021
10Recovery of allied sectors
01 02
Several industries, such as Sectors such as cement YOY Growth (%)
steel, cement, engineering, and steel are already 40
architecture, sand, glass, seeing a recovery post 20
etc., have high dependence the impact of the 1st wave 0
on the real estate sector of COVID-19 pandemic -20
(see chart) -40
-60
03 04
-80
-100
The easing of lock-down The potential growth in
Mar-15
Jul-15
Mar-16
Jul-16
Mar-17
Jul-17
Mar-18
Jul-18
Mar-19
Jul-19
Nov-15
Nov-16
Nov-17
Nov-18
Nov-19
Mar-20
Jul-20
Mar-21
Nov-20
restrictions last fiscal and housing demand could
broad-based improvement further increase the
in economic activity have growth rates in these Cement Production Steel Production
positively impacted these allied sectors over the
sectors. However with 2nd medium to long term
wave some moderation is Source: CMIE, JPC
expected in near term
11Manufacturing: Job growth can push demand for housing
India’s Manufacturing sector could benefit from the global Manufacturing wages in China materially higher
push to diversify from China:
China 493
Over dependence on Chinese supply chain and disruption
Malaysia 413
caused in it by Covid-19 have brought a sense of urgency
Thailand 413
to reduce dependence on one source India 265
Vietnam 227
India could be a beneficiary of this shift in manufacturing Philippines 220 USD per month
from China due to following reasons 200 250 300 350 400 450 500 550
Large domestic market & improving ease of doing business
India lag peers in exports (2019)
Skilled human resources available at competitive costs
3,000
2,499
Concessional corporate tax rate (15%) for new 2,500
manufacturing units set up before March 2023 2,000
USD bn
1,500
India using tariff and non-tariff measures to aggressively 1,000 706
542
support manufacturing in India 500
391 324 264 246 238
-
a
n
a
m
nd
a
a
e
di
pa
si
re
in
or
na
la
In
ay
Ch
Ko
ap
Ja
ai
et
al
ng
Th
Vi
M
Si
Sources: Kotak Institutional Equities, JM Financials, Bloomberg, JETRO, World Bank, PIB, Media reports
12Manufacturing: Job growth can push demand for housing
Government’s Focus:
Several steps taken by the Government to emphasize on the growth of the
sector include:
Production Linked Incentive Schemes for select industries to promoter
import substitutions and increase exports
Raising duties under Phased Manufacturing Programme to strengthen
domestic manufacturing and discourage imports
Rationalization of Labour Laws
Agriculture reforms to remove bottlenecks and improving market access The growth of the manufacturing
Reduction in Corporate tax rates sector and the resulting employment
generation can boost the demand for
Opening up defence sector and banning imports of select items the housing sector
Revision of MSME definition to incentivise scaling of operations
As per initial estimates, the 9 sectors under PLI are expected to generate 2.1mn direct and indirect new jobs
Sources: Kotak Institutional Equities, JM Financials, Bloomberg, JETRO, World Bank, PIB, Media reports
13Global Crisis - an opportunity for
Indian IT Services Industry 60%
55%
50%
45%
Post the Global Financial Crisis (GFC) the IT industry, 40%
FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16
particularly large companies, saw a marked increase in the TCS Infosys Wipro (IT services)
offshoring in FY09/FY10.
35%
Industry continued to see sharp recovery in FY11/FY12 as
30%
25%
corporate looked at all avenues of cutting cost in response 20%
to a tough macro economic environment - vendor 15%
10%
consolidation, large cost takeout deals and offshoring etc. 5%
0%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
COVID pandemic has led most corporate to focus on cost IT Industry Growth
optimisation and hence the Indian IT sector could see better
growth prospects in medium term. 50 Headcount (in Lakhs) % employee growth yoy 30.0
45
25.0
40
Higher IT services jobs are expected to drive faster 35
20.0
urbanisation as well as will structurally boost housing
30
25 15.0
demand. 20
15
10.0
10
5.0
5
0 0.0
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
20
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
14India’s long term growth drivers for housing remain strong
Favourable demographics, with 66% of the population
88%
Mortgages as % of Nominal GDP
being below the age of 35 90%
80%
67%
Rise in households with a shift towards nuclear 70%
56%
families
52%
60%
45%
50%
40%
38%
34%
Increasing urbanization – population residing in
31%
40%
urban areas likely to increase from 32% to 50% in 30%
20%
18%
10 years 20%
10%
10%
Low housing penetration in India – India’s mortgage 0%
loans to Nominal GDP ratio is only 10%, compared to
a
Th na
nd
M ea
Ta a
Ge an
ng y
A
De K
k
ng g
e
Ho an
ar
or
di
si
Si on
U
US
r
iw
i
la
ay
In
Ch
nm
Ko
ap
rm
k
18% in China, 34% in Malaysia, 56% in the USA and
ai
al
64% in the UK (see chart)
Source: HDFC Ltd. Presentation - Feb-21
All of the above, combined with low interest rates, improving affordability, government incentives
and improving access to credit, etc., bodes well for the housing sector in India
15HDFC
Housing
Opportunities
Fund
16HDFC Housing Opportunities Fund
Background
HDFC Housing Opportunities Fund was launched on December 6, 2017, as a close ended
fund, and has been converted to an open-ended fund with effect from January 19, 2021.
The Fund is suitable for investors looking for opportunities to participate in the growth
story of the housing and allied sectors in the long term
The Fund has an objective to provide long-term capital appreciation by
investing predominantly in equity and equity related instruments of
entities engaged in and/or expected to benefit from the growth in
housing and its allied business activities.*
At least 80% of the corpus of the scheme will be invested
in equity and equity related instruments of entities in
the housing and allied sectors, i.e., sectors
expected to benefit from the growth of
housing demand in India
*There is no assurance that the investment objective of the scheme will be realized.
For complete details, please refer the Scheme Information Document on our website www.hdfcfund.com
17HDFC Housing Opportunities Fund
In which businesses will the scheme invest?
Businesses engaged in activities
considered under the “Housing Theme”
Real Estate Financial Services Allied Sectors
Developers providing housing finance Sectors (other than housing) which are expected to
benefit from the growth of housing demand in India
Construction includes Civil construction, Engineering-Design-Construction
Cement and cement products such as concrete, aggregates, bricks, etc.
Chemicals, including paints, adhesives, water-proofing chemicals, etc.
Metals, including iron & steel, aluminium, copper, zinc, etc.
Consumer durables, including home appliances, electronic items, furniture & fixtures, etc.
Utilities, includes Power, Power transmission, LPG/LNG/PNG/CNG suppliers
Building products including glass, roofing, siding, lumber, plywood, insulation, wallboard, windows, doors, cables,
cabinets, countertops, HVAC, piping, plumbing fixtures/fittings, flooring, electrical products and many other products
Any other business activity which the fund manager thinks to be allied to the housing theme
For complete details, please refer the Scheme Information Document on our website www.hdfcfund.com
Sector classification based on IISL Housing and Allied Businesses Index
18Portfolio Positioning – Sector allocation
HDFC
FY20-23 10 year 10 year
Housing FY23 FY23
Period Earning average average Rationale
Opportunities P/E P/B
growth P/E P/B
Fund
Banks are gaining market share in home loan segment aided by low cost of fund. Worst of
Banks 32.7% 59% 12.2 14.3 1.6 1.8
asset quality cycle is behind and earnings growth likely to be among strongest
Construction and Strong order book accretion; significantly deleveraged balance sheet and Govt focus on
15.3% 14% 13.6 19 2.3 2.6
Engineering Infra/housing to drive growth visibility
Sector to see good demand growth and consequently the earnings trajectory but valuations
Home improvement* 2.0% 18% 34.4 27.4 7.9 5.6 are rich
Gas Utilities 3.3% 4% 12.7 12.9 2.0 1.9 Increase in new home sales to drive demand for Gas but earnings growth to be moderate
Housing Finance Despite losing market share in home loans, the remaining players in HFC space to see growth
10.2% 13% 21.4 19.1 3.7 3.3 driven by higher housing sales and shift of business from weaker players to stronger ones
/ NBFC
Cement and 12.7% 21% 19.2 21.0 2.6 Stable profitability matrix coupled with strong demand outlook with sector still trading at
2.4
Sanitaryware discount to Long term averages
Real estate 2.5% 47% 22.2 20.1 1.6 1.5 Residential sector seeing consolidation and rising housing demand to drive growth but
valuations are not inexpensive
Stable business outlook, trading at significant discount to long term averages and offering
Power 9.2% 12% 7.9 10.8 1.1 1.3 strong dividend yield
Upswing in global commodity prices coupled with strong demand led by Infra and housing to
Metals 3.2% 35% 11.2 9.8 1.9 1.2
drive earnings
Paints Strong demand environment being offset by rising raw material prices and risk of large new
2.9% 20% 56.8 40.8 16.4 10.4 entrant may impact earnings outlook and valuations
Source: Coverage universe of Kotak Institutional Securities
Sector classification based on IISL Housing and Allied Businesses Index
*Home improvement comprises of cables, Home appliances, Homeware, Air conditioning and consumer electronics
Data as on April 30, 2021. For complete details, please refer the Scheme Information Document on our website www.hdfcfund.com 19Market Cap Allocation
Market Cap allocation is an outcome of bottom up stock selection
and top down investment calls
The Scheme invests across market capitalization
At present, the scheme has a large cap bias (~74% of Net Assets)
The Fund has reduced its exposure to small caps over the years
Market cap break-up as on April 30, 2021 (% of NAV) Overweight in Small caps vs the benchmark (%)
80 73.98
70 April 30, 2019 16.17
60
50
April 30, 2020 12.49
40
30
18.9
20
April 30, 2021 13.93
10 5.43
0
Large Cap Mid Cap Small Cap 0 2 4 6 8 10 12 14 16 18
For complete details, please refer the Scheme Information Document on our website www.hdfcfund.com
20Portfolio Characteristics
Particulars % to NAV
Top 10 Equity And Equity Related Holdings 67.99
Total Equity & Equity Related Holdings 98.30
Cash, Cash Equivalents And Net Current Assets 0.05
Assets Under Management (₹ In Crore) 1,772
Standard Deviation** 7.379
Beta** 1.069
Data as on April 30, 2021.**For the 3 years ended April 30, 2021
For complete portfolio, please refer www.hdfcfund.com
21% to NAV
9.14
Top 10 Holdings
8.69
Company Name 8.36
Sector % to NAV
Larsen and Toubro Ltd. Construction Project 9.14
8.22
HDFC Bank Ltd. Banks 8.69
ICICI Bank Ltd. 7.80
Banks 8.36
NTPC Limited Power 8.22
7.32
State Bank of India Banks 7.80
Housing Development Fin. Corp. Ltd.£ 6.80
Finance 7.32
Ambuja Cements Ltd. Cement & Cement Products 6.80
6.64
Axis Bank Ltd. Banks 6.64
GAIL (India) Ltd. 2.51
Gas 2.51
Tata Steel Ltd. Ferrous Metals 2.51
2.51
Data is as on April 30, 2021
For complete portfolio, please refer www.hdfcfund.com
Stocks/sectors referred above are not recommended by HDFC Mutual Fund/AMC. The Fund may or may
not have any present or future positions in these stocks/sectors. The above statements / analysis
should not be construed as an investment advice or a research report or a recommendation to buy or sell
any security covered under the respective sector/s.
22Product Features
Type of Scheme An open ended equity scheme following housing and allied activities theme.
Category of Scheme Thematic Fund
Inception Date
December 6, 2017
(Date of allotment)
To provide long-term capital appreciation by investing predominantly in equity and equity related instruments of entities engaged in and/
Investment Objective or expected to benefit from the growth in housing and its allied business activities. There is no assurance that the investment objective
of the Scheme will be realized.
Fund Manager $ Rakesh Vyas
Investment Plans Direct Plan, Regular Plan
Investment Option Under Each Plan: Growth & IDCW Option. IDCW is options that offers Dividend Payout facility.
Minimum Application Amount
Purchase & Additional Purchase: Rs. 500 and in multiples of Rs. 500 thereafter
(Under Each Plan/Option)
Not Applicable. Upfront commission shall be paid directly by the investor to the ARN Holder (AMFI registered Distributor)
Entry Load
based on the investors’ assessment of various factors including the service rendered by the ARN holder.
Load Structure In respect of each purchase/switch-in of units, an Exit load of 1% is payable if units are redeemed/switched-out
within 1 year from the date of allotment.
No Exit Load is payable if units are redeemed / switched-out after 1 year from the date of allotment .
Exit Load
No Entry / Exit Load shall be levied on bonus units and units allotted on dividend reinvestment. In respect of Systematic
Transactions such as SIP, GSIP, STP, Flex SIP, Flex STP, Swing STP, and Flexindex, Exit Load, if any, prevailing on the
date of registration / enrolment shall be levied.
Lock-in period Not applicable
Benchmark India Housing & Allied Businesses Index (Total Returns Index)
$ Dedicated Fund Manager for Overseas Investments: Mr. Sankalp Baid
For further details, please refer to the Scheme Information Document/Key Information Memorandum available on our website www.hdfcfund.com.
23Scheme Performance Summary
Value of ₹10,000 invested
Additional
Scheme Benchmark Additional
Benchmark Benchmark
Period Returns Returns Scheme Benchmark
Returns (₹)#
(%) (%) # (₹)##
(%) ##
Last 1 year 48.63 73.00 49.89 14,863 17,300 14,989
Last 3 years 1.65 12.91 12.22 10,504 14,397 14,135
Since inception 1.21 13.31 13.04 10,416 15,294 15,171
The above scheme has been managed by Rakesh Vyas since June 1, 2019.
The performance of the Scheme is benchmarked to the Total Return Index (TRI) Variant of the Indices.
Past performance may or may not be sustained in the future. The above returns are of Regular Plan - Growth Option. Returns greater than 1 year period are compounded annualized (CAGR). Load is
not taken into consideration for computation of performance. #India Housing & Allied Businesses Index ## NIFTY 50 TRI. Different plans viz. Regular Plan and Direct Plan have a different expense
structure. The expenses of the Direct Plan under the Scheme will be lower to the extent of the distribution expenses / commission charged in the Regular Plan. Returns as on April 30, 2021. *Inception
date December 6, 2017. Since Inception Date = Date of First allotment in the Scheme/Plan.
24Other schemes managed by the fund manager
Cumulative Performance
Managing
Scheme scheme since 3 year 5 year
1 year
CAGR (in %) CAGR (in %)
Rakesh Vyas manages 1 other scheme
HDFC Infrastructure Fund Jun 01, 19 53.04 -7.32 1.96
NIFTY 500 (Total Returns Index) 55.74 10.45 14.77
The performance of the Scheme(s) is benchmarked to the Total Return Index (TRI) Variant of the Indices.
Past performance may or may not be sustained in the future. The above returns are of Regular Plan – Growth Option. Load is not
taken into consideration for computation of performance. Returns as on April 30, 2021. Different plans viz. Regular Plan and Direct
Plan have a different expense structure. The expenses of the Direct Plan under the Scheme will be lower to the extent of the
distribution expenses/ commission charged in the Regular Plan.
25Disclaimer
For further details, refer SID and KIM available on www.hdfcfund.com and at ISC’s of HDFC Mutual Fund. HDFC MF/AMC is not
guaranteeing/offering/communicating any indicative yield or guaranteed returns made in this scheme. The views expressed herein are as
of June 3, 2021 and are based on internal data, publicly available information and other sources believed to be reliable. Any calculations
made are approximations, meant as guidelines only, which you must confirm before relying on them. The information contained in this
document is for general purposes only and not an investment advice. The document is given in summary form and does not purport to be
complete. The document does not have regard to specific investment objectives, financial situation and the particular needs of any specific
person who may receive this document. The information/ data herein alone are not sufficient and should not be used for the development
or implementation of an investment strategy. The statements contained herein are based on our current views and involve known and
unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied
in such statements. Past performance may or may not be sustained in future. HDFC AMC / HDFC Mutual Fund is not guaranteeing /
offering / communicating any indicative yield on investments made in the scheme(s). Neither HDFC AMC and HDFC Mutual Fund (the
Fund) nor any person connected with them, accepts any liability arising from the use of this document. The recipient(s) before acting on
any information herein should make his/her/their own investigation and seek appropriate professional advice and shall alone be fully
responsible / liable for any decision taken on the basis of information contained herein.
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS,
READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.
26Thank You
You can also read
