For any individual having a shelter of your own is one of the most important needs, namely after food and clothing. India’s population is expected to grow by 2050; with the increasing population, more housing would be required. The rising trend of nuclear families may also help in driving the demand for housing.
As a result, the housing theme and allied sector related to housing space significantly contribute to the GDP of the country. Moreover, as the economy improves from the pandemic impact, the housing segment is expected to have a turnaround. All these factors may give a strong impetus to the housing theme in the coming years.
Earlier perceived as elite, perception towards Real Estate as an asset class for investment or for consumption has changed, thanks to the substantial increase in earnings capability and better affordability of individuals. The Government has been trying to stimulate activity in the sector through various supportive measures such as affordable housing, the Affordable Rental Housing Complex (ARCH) scheme, stamp duty cuts by the government of Maharashtra and Madhya Pradesh, and the government has allowed 100% FDI for townships and settlements development projects.
Investors looking for opportunities to participate in the potential growth of the Housing theme may consider investing in mutual fund schemes that focus on investing in stocks and sectors related to the housing segment.
ICICI Prudential Mutual Fund has launched ICICI Prudential Housing Opportunities Fund. It is an open-ended equity scheme following a housing theme. The scheme will not only invest in stocks of real estate companies that directly benefit from the growth of the housing market but also in the associated sectors under the housing space.
Commenting on the launch of NFO, Mr Chintan Haria, Head, Product Development and Strategy at ICICI Prudential AMC, said, “Housing as a theme, we believe 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, an increase in Capex, stamp duty cuts, and 100% FDI for townships and settlements development projects, to name a few. India, one of the fastest growing economies, should see strong demand for housing as seen historically in other developed economies.”
Table 1: Details of ICICI Prudential Housing Opportunities Fund
|An open-ended equity scheme following a housing theme.
|To generate long-term capital appreciation by investing in equity and equity related instruments of entities engaged in and/or expected to benefit from the growth in housing theme. However, there can be no assurance or guarantee that the investment objective of the Scheme would be achieved.
|Rs 5,000 and in multiples of Re 1/- thereafter. Additional Purchase Rs 1,000/- and in multiples of Re. 1 thereafter.
|Rs 10/- per unit
|Nifty Housing Index
|March 28, 2022
|April 11, 2022
(Source: Scheme Information Document)
The investment strategy for ICICI Prudential Housing Opportunities Fund will be as follows:
ICICI Prudential Housing Opportunities Fund shall endeavour to generate capital appreciation by investing in equity & equity-related instruments of entities that are engaged in and/or expected to benefit out of the housing theme.
The investment universe of the scheme will be basic industries like Power, Cement, Consumer Electronics etc. (that form a part of the Nifty Housing Index). The stocks may be at any level of market capitalization. The Fund Manager would aim to build a portfolio by identifying entities within the list of basic industries under the Housing theme that have the potential for meaningful growth and which have a certain sustainable competitive advantage.
The Scheme can invest up to 20% in other equities and equity-related securities. The Scheme may also invest a part of its corpus in overseas markets in Global Depository Receipts (GDRs), ADRs, foreign equity securities, mutual funds, and such other instruments as may be allowed under the Regulations from time to time, including securities issued by companies engaged in the Housing theme. The Scheme may also invest in debt and money market instruments to meet the liquidity and expense requirements.
Under normal circumstances, the Asset Allocation will be as under:
Table 2: Asset Allocation for ICICI Prudential Housing Opportunities Fund
|Indicative Allocation (% of net assets)
|Equity & Equity related instruments of entities involved in Housing theme
|Other Equity & Equity related instruments
|Debt instruments, Units of Debt Mutual Fund schemes*, Money market instruments @, and Preference Shares
|Low to Medium
|Units issued by REITs and INVITs
@Excluding subscription money in transit before deployment / pay out
*The Scheme may invest in other Schemes under the same AMC or any other Mutual Fund without charging any fees, provided the aggregate inter-Scheme investment made by all the Schemes under the same management or in Schemes under the management of any other asset management company shall not exceed 5% of the Net Asset Value of the Fund.
(Source: Scheme Information Document)
About the Benchmark
The Nifty Housing Index aims to track the performance of the portfolio of stocks that broadly represent the Housing theme. The largest 50 stocks from eligible basic industries are chosen based on 6-month average free-float market capitalisation. Index stock weights are based on their free-float market capitalization. Sector weights are capped at 25% each, and stock weights are capped at 10% each.
(Source: ICICI Pru Housing Opportunities Fund PPT)
Who will manage ICICI Prudential Housing Opportunities Fund?
Mr Sankaren Naren, Mr Anand Sharma, and Ms Priyanka Khandelwal (for overseas investments) will be the designated fund manager for this scheme.
Mr Sankaren Naren has over 30 years of experience in Fund Management, Equity Research, Operations. etc. He holds a B. Tech degree from IIT Chennai and PGDM from IIM Kolkata. Prior to joining ICICI Pru AMC, he was associated with Refco Sify Securities India Pvt. Limited as Head of Research, HDFC Securities Ltd. as Vice President and later as the Director and COO and with Yoha Securities as the CEO.
At ICICI Pru AMC, Mr Naren currently manages ICICI Prudential Exports and Services Fund, ICICI Prudential Equity & Debt Fund, ICICI Prudential Balanced Advantage Fund, ICICI Prudential MultiAsset Fund, ICICI Prudential Asset Allocator Fund (FOF), ICICI Prudential Passive Strategy Fund (FOF), ICICI Prudential Thematic Advantage Fund (FOF), ICICI Prudential India Opportunities Fund, ICICI Pru Global Advantage Fund (FOF), ICICI Prudential Value Discovery Fund and ICICI Prudential Passive Multi-Asset Fund of Funds.
Mr Anand Sharma holds B.E. (Computer Engineer) degree and has completed Master of Management Studies from the University of Mumbai. He has been appointed as the Senior Investment Analyst – MF Equity in the Investments Department of ICICI Pru AMC. Prior to this, he has worked with Oracle Financial Services Software Ltd. as Associate Consultant. Mr. Sharma currently does not manage any other scheme at ICICI Pru AMC.
Ms Priyanka Khandelwal will be managing the overseas investments for this scheme. She is a CA, CS, and B. Com graduate. She has joined ICICI Prudential Asset Management Company Limited in October 2014 and has over 7 years of experience in financial services.
At ICICI Pru AMC, Ms Khandelwal currently manages international schemes ICICI Prudential Global Stable Equity Fund (FOF), ICICI Prudential US Blue-chip Equity Fund, ICICI Prudential Nasdaq 100 Index Fund, and ICICI Prudential Strategy Metal and Energy Equity Fund of Funds (FOF).
Fund Outlook – ICICI Prudential Housing Opportunities Fund
ICICI Prudential Housing Opportunities Fund aims to invest in basic eligible themes that form a part of the Nifty Housing Index. The scheme endeavours to invest in equity and equity-related instruments of entities engaged in and/or expected to benefit from the growth in the Housing theme.
The Housing theme addresses the basic need of an individual, and the cycle for Housing theme in India seems to be poised for a turnaround. The Housing theme captures various sectors that are essential under the theme, like cement, consumer electronics, housing finance, banks, power, steel, gas suppliers (CNG, PNG), paints, and so on. The scheme allows investors to benefit by participating in the potential growth of the Housing theme.
Although the scheme will not just invest in stocks of real estate companies but also the allied sectors that will benefit from the growth of the housing market, it will be prone to high market volatility. Due to the looming threat of the Omicron variant plus certain central banks of the world increasing policy rate amidst inflationary pressures and the recent geopolitical tensions between Russia-Ukraine with, a surge in crude oil prices may pose a risk to the economic growth. This may weigh down the Nifty Housing Index and its top constituents. Among these, many other factors may affect the scheme’s performance, and the portfolio may face intensified volatility in the near term.
Being a thematic fund, the scheme has a narrow investment objective and will be actively managed. It will focus on investing in companies dedicated to housing themes only, which makes it prone to concentration risk. This may affect the scheme negatively if the sector moves out of favour. The fortune of this fund will depend predominantly on the growth prospects of the housing sector.
Thus, focusing on a thematic index, ICICI Prudential Housing Opportunities Fund is a very high-risk investment proposition and suitable for investors with a decent understanding of the housing space with a high-risk appetite and a time horizon of over 5-years.
This article first appeared on PersonalFN here