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Housing for all by 2022—big opportunity in small housing. The Indian government
aims to provide 100 mn new units of primarily affordable housing by 2022 at a cost of
`108 tn. The government would be constrained to reach this goal on its own and
would need to incentivize private players. Private developers, hitherto riding high-end
demand, would have to change their business models to focus on volume rather than
pricing. The spurt in demand from middle- and low-income groups is likely to benefit
housing finance companies significantly
�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��
��
Private developers need incentives to address demand at the low end
The government’s aim to provide housing for all Indians calls for investment of `93 tn,
excluding land costs, to provide about 95 mn homes. The government will need to enlist
private-sector participation to achieve this ambitious plan. More specifically, success of the plan
depends on (1) incentives for developers, (2) higher floor area ratio (FAR) and densities and (3)
Central funds to cross-subsidize states (though land is a state subject) and (4) sustained political
commitment to the goal – which will automatically ensure that legal and regulatory
requirements fall into place.
Developers to stay strong in middle-high end markets; must tweak models to address low-end
Middle-income groups (MIG) and high-income groups (HIG) will consume 3.8-5 mn housing
units over 2012-22. Since 2008, over 90% of new housing in top seven metros was absorbed
and developers grew by expanding to newer locations. As the emphasis shifts to homes for the
masses, to grow, large developers will have to alter their business models to generate large
volumes and at low prices
Mumbai developers, especially HDIL, are best placed to benefit from any thrust on affordable
housing, though some are plagued by internal issues. We like Prestige and Sobha, among the
companies in our coverage universe, for their strong operations, but believe they are fairly
priced. We believe DLF’s operations are slated for recovery once the company corrects its
products and pricing. We have BUY ratings on DLF and Oberoi.
Housing finance companies are moving down the value chain
Housing finance companies are gradually moving towards the low end of the market, much of
this in suburban and small-town India. We expect housing loans in India to grow by 19% CAGR
over FY2014-22 to `35 tn. We find that maximum demand is for loans of `1-2.5 mn and over
`2.5 mn.
We initiate coverage on Dewan Housing Finance (DHFL) with a BUY rating (TP: `540). We
reiterate ADD on HDFC (TP: `1,210) and LICHF (TP: `450). We believe DHFL and Repco are
strong plays on latent demand in the low- to middle-income segment; HDFC and LICHF are well
placed in the mid- to high-end segments while Mahindra Housing Finance and Gruh Finance
are at the lowest end of the market.
LINK
http://www.kotaksecurities.com/pdf/indiadaily/indiadaily09012015ay.pdf
Housing for all by 2022—big opportunity in small housing. The Indian government
aims to provide 100 mn new units of primarily affordable housing by 2022 at a cost of
`108 tn. The government would be constrained to reach this goal on its own and
would need to incentivize private players. Private developers, hitherto riding high-end
demand, would have to change their business models to focus on volume rather than
pricing. The spurt in demand from middle- and low-income groups is likely to benefit
housing finance companies significantly
�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��
��
Private developers need incentives to address demand at the low end
The government’s aim to provide housing for all Indians calls for investment of `93 tn,
excluding land costs, to provide about 95 mn homes. The government will need to enlist
private-sector participation to achieve this ambitious plan. More specifically, success of the plan
depends on (1) incentives for developers, (2) higher floor area ratio (FAR) and densities and (3)
Central funds to cross-subsidize states (though land is a state subject) and (4) sustained political
commitment to the goal – which will automatically ensure that legal and regulatory
requirements fall into place.
Developers to stay strong in middle-high end markets; must tweak models to address low-end
Middle-income groups (MIG) and high-income groups (HIG) will consume 3.8-5 mn housing
units over 2012-22. Since 2008, over 90% of new housing in top seven metros was absorbed
and developers grew by expanding to newer locations. As the emphasis shifts to homes for the
masses, to grow, large developers will have to alter their business models to generate large
volumes and at low prices
Mumbai developers, especially HDIL, are best placed to benefit from any thrust on affordable
housing, though some are plagued by internal issues. We like Prestige and Sobha, among the
companies in our coverage universe, for their strong operations, but believe they are fairly
priced. We believe DLF’s operations are slated for recovery once the company corrects its
products and pricing. We have BUY ratings on DLF and Oberoi.
Housing finance companies are moving down the value chain
Housing finance companies are gradually moving towards the low end of the market, much of
this in suburban and small-town India. We expect housing loans in India to grow by 19% CAGR
over FY2014-22 to `35 tn. We find that maximum demand is for loans of `1-2.5 mn and over
`2.5 mn.
We initiate coverage on Dewan Housing Finance (DHFL) with a BUY rating (TP: `540). We
reiterate ADD on HDFC (TP: `1,210) and LICHF (TP: `450). We believe DHFL and Repco are
strong plays on latent demand in the low- to middle-income segment; HDFC and LICHF are well
placed in the mid- to high-end segments while Mahindra Housing Finance and Gruh Finance
are at the lowest end of the market.
LINK
http://www.kotaksecurities.com/pdf/indiadaily/indiadaily09012015ay.pdf
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