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MF News Should you recommend housing fund to your clients?

Should you recommend housing fund to your clients?

HDFC Mutual Fund will launch industry’s first housing focussed fund, HDFC Housing Opportunities Fund on Nov 16.
Padmaja Choudhury Nov 13, 2017

Expecting a big impetus in the affordable housing sector, HDFC Mutual Fund has introduced HDFC Housing Opportunities Fund. 

This comes on the back of government’s ‘Housing for All by 2022' initiative, which targets to build five crore homes through direct funding from the central and state governments and active participation by the private sector.

The new fund offer of the close-ended scheme will remain open for subscription from November 16 to November 30.

In a note sent to Cafemutual, the fund house says that it is the right time to participate in the growth story of the Indian housing sector and its allied businesses considering the increasing affordability of people to buy a house. Further, there has been a decent rise in income. In addition, the mortgage rates have reduced from their all-time high levels.

Gandhinagar-based Bakul Mehta of Sanjivani Insurance & Investment believes that investors may benefit from this fund given the government’s push for affordable housing. “As the fund will invest in companies in the housing sector such as banks, cement, steel and paints, these stocks will benefit from the government’s push towards creating low-cost housing,” says Bakul.  

Another feature of the fund is its thematic nature. Delhi-based Prashant Mourya of Citrine Financial Advisors feels that the fund is well diversified. “Though the underlying theme is housing, the fund is not a sectoral fund as it does not play on just one sector. The fund will invest in multiple sectors such as banks, NBFCs, engineering companies, steel companies and other consumer discretionary companies. In addition, the close end structure ensures that investors will remain invested at least for three years. Currently, many investors have been redeeming money due to market rally,” says Prashant.

However, a few advisors have a different opinion on this fund. They say that there is no need for such close-ended funds as open-ended funds can also take exposure in such companies. “Diversified schemes can take exposure to stocks that will benefit from the housing scheme. I do not see any reason why advisors should advise this fund to their client,” says a Mumbai-based advisor.

Advisors also caution investors to be aware of the risk associated with close end funds. “If the broad market is bleak at the time of maturity, investors may see inadvertent fall in returns even if the portfolio is good,” says Bakul.

Advisors say that investors with high-risk appetite can consider taking exposure to this fund. "This fund is for seasoned investors who have witnessed at least one market cycle. Such investors with high-risk appetite can invest around 15-20% of their investible corpus in this fund. First-time investors should stay away from this fund," says Prashant.

 

 

1 Comment
Shivkumar Kalra · 1 week ago
According to many report read, seen and heard, in metro cities more than 50% Residential Homes are kept empty, vacant by Investors by buying them at above market price or through Developer by encouraging them to delay complete their projects as long as they could, because anyway they want to keep their homes vacant. Till today nobody has suggested dehousinisation of homes like demonetization of currency.
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