Helping You Build Wealth With Honest Research
Since 1996. Try Now

MEMBER'S LOGIN

MEMBER'S LOGINX

     
Invalid Username / Password
   
     
   
     
 
Invalid Captcha
   
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Housing demand here to stay
Wed, 17 Oct Pre-Open

Housing loans as a proportion of GDP in India are at a low of 8% while in China it comes in ahead of 20%. In developed countries across the world, this ratio is closer to 70-80% and the market is close to saturation. Thus there is a huge potential for growth in this segment which will benefit players such as HDFC, LIC Housing, Dewan Housing and a number of commercial banks. But, are high interest rates, courtesy the Reserve Bank of India (RBI)'s aggressive liquidity policy holding back from demand for new homes.

Well, according to Mr. Keki Mistry, the MD of HDFC, this is not the case. He believes that for the Indian middle class interest rates do not matter as much as affordability of housing. Another factor that helps determine growth is demographics. India is a very young country where 60% of population is less than 30 years. People think of buying a house on loan when they are in their mid-thirties. Affordability is 4-5x of their annual income. But, not every address or region is created alike. Let's take the financial capital Mumbai for example. A prime property in the swanky South Mumbai area could cost Rs 1 lakh per square foot (sq ft) while in the distant suburb of Vihar the rate could be Rs 3,000 per sq ft. Thus within the Mumbai metropolitan area there isn't much demand, but the Navi Mumbai and Kalyan area is seeing traction.

The biggest question for home buyers is whether the real estate market is in for a correction. Well, while there is some correction possible in a few pockets of metro cities, overall demand is here to stay. However, infrastructure and transport facilities in and between cities need improvement for the demand to catch up elsewhere.

Builders are also having a tough time and have seen a tight squeeze in funding. Since the Lehman Brothers collapse and the financial crisis in 2008, things were really bad for builders. However, things have improved somewhat now. In 2011 there were a number of builders going for IPOs including Oberoi Realty and Prestige Estates, as they were building a large land bank and were going in for high-end apartments. However, the focus has now shifted to affordable housing, albeit partially. With better pricing, India's favourable demographics and low penetration we believe that growth in housing industry will continue to see good traction over the long term.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

View all commentaries | Archives

Read the latest Market Commentary


Equitymaster requests your view! Post a comment on "Housing demand here to stay". Click here!

  
ABOUT EQUITYMASTER

Since 1996, Equitymaster has been the source for honest and credible opinions on investing in India. With solid research and in-depth analysis Equitymaster is dedicated towards making its readers- smarter, more confident and richer every day. Here's why hundreds of thousands of readers spread across more than 70 countries Trust Equitymaster.

PREMIUM PRODUCTS
QUICK LINKS
POPULAR TOPICS
TRENDING TOPICS
FREE NEWSLETTERS
EQUITYMASTER SUPPORTS
  • HelpYourNGO
  • You Tube
  • Linkedin
  • Twitter
  • Telegram
  • Google Play

Copyright © Equitymaster Agora Research Private Limited.

Whitelist | Refer | Terms | Privacy | Contact | About | Sitemap

Phone +91-9136015013

Equitymaster Agora Research Private Limited (Research Analyst)
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Email: info@equitymaster.com. Website: www.equitymaster.com.
CIN:U74999MH2007PTC175407

Name of the Compliance & Grievance Officer: Ms Sonal Ramachandran
Telephone: +91-22-61434003 | Email: compliance@equitymaster.com

LEGAL DISCLAIMER:
Investment in securities market are subject to market risks. Read all the related documents carefully before investing.
Registration granted by SEBI and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.

All rights reserved. Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

Equitymaster Agora Research Private Limited (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA, Canada or the European Union countries, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.