1. Budget 2018: Housing sector is a good bet for investors ahead of the big day

Budget 2018: Housing sector is a good bet for investors ahead of the big day

Budget 2018: Affordable housing has been an important reform for the Narendra Modi-led government. The newly enacted Real Estate Regulation Act (RERA) is a case in point. Housing for All by 2022’ the erstwhile Indira Awas Yojana was renamed as Pradhan Mantri Awas Yojana Grameen, was launched in 2015.

By: | Updated: January 24, 2018 1:15 AM
Budget 2018 is likely to bring more reforms to make housing more affordable in 2018. Budget 2018 is likely to bring more reforms to make housing more affordable.

Budget 2018: Affordable housing has been an important reform for the Narendra Modi-led government. The newly enacted Real Estate Regulation Act (RERA) is a case in point. Apart from RERA, Housing for All by 2022’ is a Government of India initiative under which, the erstwhile Indira Awas Yojana was renamed as Pradhan Mantri Awas Yojana Grameen, and another scheme Pradhan Mantri Awas Yojana Urban, was launched in 2015.  “We have to keep the momentum going on infrastructure creation, including rural infrastructure. Therein lies the core of India’s future growth story,” Finance Minister Arun Jaitley had said recently, laying specific emphasis on housing and sanitation. Budget 2018 will be closely monitored by one and all.

Also read: Budget 2018 Q&A: ‘Dividend distribution tax at receiver’s end not much useful, won’t raise collections’

Research house Edelweiss is bullish on the shares of Century Plyboards from the space. “The company’s capacity augmentation plan included 12 percent increase in plywood capacity, 50 percent in laminate capacity and a new 1,98,000CBM MDF plant (largest in the segment by any player) which is envisaged to drive earnings over FY18-20. Most of this capex has been completed, with the entire exercise envisaged to be over by FY18. With ramp up in utilisation over the next 2 years and no firm capex plans on the horizon, we anticipate huge free cash flow generation,” Edelweiss said in its report.  So, Union Budget 2018 may have some pleasant surprises in store.

Among the top gainers in 2017 are realty stocks which have offered attractive returns since Budget 2017. The prominent names include Indiabulls Real Estate rising 231 percent between February 1, 2017, and January 15, 2018. Shares of Sunteck Realty, Sobha and Godrej Properties 7.15 % have risen 228 percent, 121 percent, and 139 percent, respectively, during this period.

Watch video: Budget 2018 to focus on infrastructure, look at private capital to fund affordable housing

Mahesh Nandurkar of CLSA says that the firm is bullish on the prospects of the housing sector in India. Interestingly, in its latest research report, Edelweiss too has identified housing sector as the theme to bet on in Union Budget 2018. According to the research firm, major growth drivers in the space include India’s low per capita consumption of all home building material products; rising GDP, urbanization, disposable income, nuclear families; shortening renovation cycle due to high real estate cost;  and virtually untapped but high potential rural market. Edelweiss is bullish on companies into home-building materials, as it expects government thrust on affordable housing combined with low-interest rates to bode well for the sector. “We are actually quite optimistic on the housing side of the equation and we can talk about that later but, on the broader theme for NBFCs, multiples are high and we are quite concerned about the bond yields,” said Mahesh Nandurkar of CLSA. Budget 2018 may bring in good news.

Also read: Budget 2018: All that could be in Arun Jaitley’s kitty for middle class, even for ‘new middle class’

“Rural spending as a percentage of GDP has come down below 1 percent from 1.4 percent in last 5 years. We could see a boost in rural spending in Budget 2018. Push to NREGA, Rural Road, Rural Housing…” said Asif Iqbal of Escorts Securities.

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