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Aavas, HUDCO: Shares of housing finance companies rise to 11%; here’s why | Markets News
Affordable Housing continues to be a focused segment with high operational intensity and companies focused on a single product can provide better long-term results.
Deepak Korgaonkar Bombay
Shares of housing finance companies (HFCs), mainly medium and small, were in focus and rose as much as 11 percent in Tuesday’s intraday trade after the Union Cabinet approved government aid for construction of 30 million of houses under the Pradhan Mantri Awas Yojana (PMMA).
Home First Finance Company (up 11 percent to Rs 961.60), Aavas Financiers (9 percent to Rs 1,893), GIC Housing Finance (8 percent to Rs 238.55) and Housing & Urban Development Corporation (HUDCO) (8 percent to Rs 289.90) rose over 7 percent. While, Can Fin Homes, Indiabulls Housing Finance and Star Housing Finance rose in the range of 2% to 3%. In comparison, the BSE Sensex rose 0.24 percent to 76,673 at 11:39 am.
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The Union Cabinet, in its first meeting under the chairmanship of Prime Minister Narendra Modi, on Monday approved government assistance for construction of $3 million houses under PMAY. The government of India has been implementing PMAY since 2015-16 to provide assistance to eligible rural and urban families to construct houses with basic amenities.
The measure is positive for small housing finance stocks, as the government announced a renewed affordable housing scheme, extending benefits to housing finance companies, according to analysts.
The growing Indian economy will lead to an increase in the middle class population and provide a secular opportunity for housing finance. Gujarat, Maharashtra, Tamil Nadu, Andhra Pradesh, Telangana and Karnataka, which comprises around 60 percent of the total affordable housing finance market in the country.
Among individual stocks, Home First Finance Company rose 11% to Rs 961.60. The stock has recovered 24 percent from its recent low of Rs 778.
The company’s primary business is loan financing for the affordable housing segment in India and is primarily engaged in the business of housing loans, loans for the purpose of purchasing a commercial property and loans against property.
Affordable Housing continues to be a focused segment with high operational intensity and companies focused on a single product can provide better long-term results.
The states of Uttar Pradesh, Madhya Pradesh and Rajasthan are major emerging markets in the affordable housing space, owing to the increasing pace of industrialization and urbanization taking place in these states. Home First Finance believes that the next phase of growth will come from these states and intends to increase its presence in these markets in the coming years.
Shares of HUDCO, the state-owned company, jumped 8 percent to Rs 289.90, up 42 percent from the June 5 intraday low of Rs 203.85.
In addition to financing low-cost social housing and non-commercial urban infrastructure projects, HUDCO offers consultancy services on innovative and cost-effective construction technologies.
India Ratings and Research (Ind-Ra) expects that HUDCO’s role as a public policy institution is likely to continue. HUDCO is engaged in the development of affordable housing and sustainable urban infrastructure. It has a social mandate to finance the housing needs of the economically weaker section/low income group category along with improvement of non-commercial urban infrastructure.