ATM :: MFs invest Rs 1 lakh cr in stocks in 2017; remain bullish

The high investment by mutual funds could be attributed to strong participation from retail investors.
PTI | Dec 31, 2017 11:15 AM IST | Source: PTI | MoneyControl.com

ATM

Domestic mutual funds pumped in a staggering over Rs 1 lakh crore in the stock market during 2017 and remain bullish in the New Year to maximise the returns for investors.

Mutual funds invested Rs 1.2 lakh crore in equities in 2017, much higher than over Rs 48,000 crore infused last year and more than Rs 70,000 crore pumped in during 2015, latest data with the Securities and Exchange Board of India (Sebi) showed.

“We are seeing a clear shift in preference for financial assets over physical assets such as real estate and gold, which is likely to continue even going forward.

“Apart from this trend, the consistent delivery of returns by the mutual fund industry, prudent risk management and increasing initiatives on enhancing investor awareness assisted in increasing the penetration of mutual fund products,” Kotak Mutual Fund CIO Equity Harsha Upadhyaya said.

The high investment by mutual funds could be attributed to strong participation from retail investors.

In fact, retail participation is now providing the much needed liquidity to the stock markets that have been largely driven by Foreign Portfolio Investors (FPIs) for the past few years.

The investment by mutual funds in equities have outshone those by FPIs.

FPIs have infused close to Rs 50,000 crore this year after putting in over Rs 20,500 crore last year and nearly Rs 18,000 crore in 2015. Prior to that, they had pumped in over Rs 97,000 crore in 2014.

“This year the domestic institutional investors have pipped FPIs on net inflows, thus making the market less dependent on FPI money.

“This has also provided greater stability to the market as during the times when FPIs were pulling money out of the Indian equity markets, the stock market continued its upward march with the support from the flows by domestic institutional investors,” Morningstar India Senior Analyst Manager Research Himanshu Srivastava said.

Retail money flew into equities through mutual funds supported the benchmark indices — Sensex and Nifty — that surged by 28 percent and 29 percent respectively this year. Further, retail investor accounts grew by 1.4 crore to 5.3 crore.

The spike in bank deposits and consequent decline in interest rates following demonetisation on November 8, 2016 has also helped mutual funds.

“Mutual fund distributors too have played a key role in connecting with their existing and new customers. This has not only resulted in his increasing wallet share of customer, it has also helped the distributor in getting new customers to the industry,” Amfi Chairman A Balasubramanian said.

“It is also believed that investors are no more interested in buying into traditional asset classes such as real estate and gold, thus moving to financial asset class,” he added.

Source: https://goo.gl/ibBNN3

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Interviews :: Alpha generation in large-cap funds would compress going ahead

Mahesh Patil, Co-CIO, Aditya Birla Sun Life AMC on how he is creating alpha in the large cap space, his contra calls and more.
By Morningstar Analysts | 27-12-17 |

The asset size of Aditya Birla Sun Life Frontline Equity Fund has crossed Rs 20,000 crore. Do you see size posing an issue to manage this fund going forward?

We maintain a good diversification in this fund by having exposure across sectors. We aim to beat the benchmark consistently and incrementally rather than taking very large sectoral bets. Given that the fund invests at least 80% of its assets in large cap stocks, we don’t see size posing as a challenge. Besides, the core of the portfolio has very long term holdings. That said, as the fund size increases it becomes slightly more difficult to build or unwind positions in stocks and needs more effort. But it is part of the process and does not affect the performance significantly.

We have a large number of stocks (60-70) in the portfolio as compared to other similar funds in the industry. Before deciding the quantum of exposure warranted in any stock, we take a close look at the liquidity of the stocks. This strategy allows us to manage large size.

It is becoming difficult for managers to generate alpha in the large cap space. How do you overcome this challenge?

We are seeing a huge rally in the mid and small cap stocks and large cap funds obviously can’t take exposure to such stocks. So multi-cap funds have been able to generate decent alpha by maneuvering where the opportunities are.

As markets mature and price discovery happens across stocks its going to become difficult to generate alpha in large caps. The alpha generation which we saw in the last three to four years would compress going ahead. This is because the alpha was high as compared to the historical average, especially during calendar year 2014-16.

We never target to generate superlative alpha in large cap funds. Instead, we endeavor to find some new stock ideas every year which keeps the portfolio fresh. If there is a serious underperformance, we are nimble enough to take corrective action. While everything is fairly priced in the market at this juncture, we try to continuously look out for undervalued companies. Some amount of contrarian investing and moving away from the crowd helps to spot early turning points in stocks/sectors. Similarly, we maintain a discipline to trim exposure in certain stocks that have overshot their valuation target. This strategy enables us to buy stocks which are relatively cheap in terms of valuation. So some amount of active management is also required at this juncture to generate alpha in the large cap space.

In which sectors/themes are you deploying the steady inflows coming in equity and balanced funds?

We have been overweight on banking and financial services. Financial services sector has had a good run and the valuations have moved up. Hence we are more discrete now in choosing the right segments that offer better growth. While we prefer private retail banks, we are slowly warming up to corporate banks because of some clarity emerging on resolutions of bad debts and a cyclical recovery in economy.

Besides, we are positive on consumer discretionary space. We are seeing a higher demand for discretionary consumption as the per capita income is moving up in India. Further, the implementation of GST will benefit players in the building material, consumer durables and retail space. Rural consumption is also starting to improve with normal monsoons and government focus on stepping up rural spending.

We are fairly overweight on metals. Metal prices are steady as China is cutting down capacity on the back of environmental issues which is supporting price. Indian companies are also deleveraging which will increase their equity value.

Another sector where we are taking a contrarian call is telecom. We are seeing consolidation happening faster than we expected in this sector. While there is still some pain for a few quarters, over a three-year time frame it could be a good time to look at some leading telecom companies.

We are selective in the infrastructure space. Road, railways and urban transport are some pockets where there is significant traction. Companies positioned in this sector are expected to see good increase in their order books.

Post SEBI’s diktat on scheme categorization, how are you restructuring your funds? Are you planning to merge smaller schemes?

Fortunately, we have been working on consolidating schemes much before the SEBI circular came out. Most of our equity funds are aligned as per SEBI categorization. We would look to merge some thematic funds.

Overseas fund of funds category is seeing continuous outflows. What are the reasons for the waning demand for this category.

The awareness level about this category is low. Domestic market has been doing well so people are preferring to invest in India. Overseas fund of funds have done well though.

As markets mature and you see enough ownership of domestic funds, people would look to invest outside India. There are a lot of new generation companies which investors can take exposure through these funds.

Though taxation of this category is an issue, you need to realize that if you are making good returns it should not be a problem. HNIs who already have a high exposure to India can look at these funds. Also, those wish to send their children overseas for education can consider these funds because the underlying returns are dollar based. To some extent, you are taking the currency hedge through these funds.

When do you see private-sector investment picking up?

Private sector investment has been elusive. But there are a couple of factors which indicate that investment will pick up one year down the line. Firstly, capacity utilization has bottomed out and is showing early signs of improving. Secondly, while a lot of large corporates in metals and infra space are saddled with high debt were are seeing the deleveraging cycle has started for some companies. Corporate debt to GDP which peaked out in 2016 is starting to come off. Finally, bank recapitalization would enable corporates to re-leverage and begin the next capex cycle. Sectors like Steel, Oil and Gas, fertilizer and auto are the first to see a revival.

During every budget we get to hear about suggestions to reinstate long-term capital gains (LTCG) tax on equity investments. Some say that exemption of LTCGT can lead to market manipulation. What are your views? If the government introduces LTCGT what would be the impact on markets?

The exemption of LTCGT has helped attract investors in equities. But that’s not the only reason why people invest in equities. They invest because they expect better returns. If there is money to be made in markets, I don’t think it would deter investors from this asset class. So introduction of LTCGT would not have an impact on long term investors. However, it could hurt the sentiments in the short run. We could see some curb in short term speculative money moving in stocks having weak fundamentals.

How has your investment philosophy evolved over the years?

While our broad philosophy has remained the same, we have started giving more attention to management quality while evaluating companies. Our time horizon of owning stocks has also increased and we are evaluating companies with a three-year perspective. There is a larger focus on how companies are generating free cash flows and how it is being utilized. These factors impact the PE multiples. So we are willing to pay a premium if these factors are favorable. To sum up, we have been incorporating these factors in our philosophy.

Your favorite book

One book which I found interesting is ‘Good to Great’ authored by Jim Collins. The book gives good insights into building an organization and focuses on what really matters to not only to survive and endure but to excel.

Source: https://goo.gl/i9ro1V

ATM :: Things to know before investing in ELSS

India Infoline News Service | Mumbai | December 30, 2017 18:41 IST
Learn about ELSS investment & answer to all your questions like what is ELSS, how to invest in ELSS, tax benefits in ELSS at Indiainfoline

ATM

Equity Linked Savings Scheme or ELSS funds are a type of mutual funds whichbase their returns from the equity market. These funds are tax saving in nature and are eligible for a tax deduction of up to Rs1.50 lakhunder Section 80C of the Income Tax Act. Below are a few things that an investor must know before investing in ELSS funds.

What is ELSS?

ELSS schemes are a category of mutual funds promoted by the government in order to encourage long term equity investments. Under this scheme, most of the fund corpus is invested in equities or equity-related products.

Types of ELSS:

There are two categories in ELSS mutual funds i.e. dividend and growth.

The dividend fund is further divided into Dividend Payout and Dividend Reinvestment. If an investor opts fordividend payout option, he receives the dividend which is also tax-free,however,underthe dividend reinvestment option, the dividend is reinvested as a fresh investment to purchase more shares.

Under the growth option, an investor can look for longterm wealth creation. It works like a cumulative option whose full value is realized on redemption of the fund.

How to invest in ELSS?

One can invest in ELSS via two methods i.e. lumpsum or SIP.

SIP or Systematic Investment Plan, is a process where an investor needs to invest a fixed amount of money every month at a specified date. SIP inculcates a disciplined approach towards investing in an investor. SIP also gives the benefit of rupee cost averaging to an investor.

What is the lock-in period in ELSS?

ELSS funds have a lock-in period of three years. Whencompared to EPF, PPF, NSC and other prevalentinvestments under Section 80C, ELSS has the shortest lock-in period.

What is the benefit of tax in ELSS?

The primary purpose of any investment is to gain deductions under income tax for wealth creation. ELSS funds fit that bill perfectly. An investor gets a doubleedged benefit of tax saving and wealth creation at the same time. Dividends earned from ELSS funds are also exempted from tax. ELSS funds also provide the benefit of long term capital gains as they have a lock-in period of three years.

What is the investment limit of ELSS funds?

One can start investing in ELSS mutual funds with a minimum amount of Rs500, and there is no upper limit on how much a person can invest in ELSS funds. However, the tax saving ceiling is only up to a maximum of Rs1,50,000 a year.

What are the risks involved in ELSS funds?

ELSS mutual funds do not have ironclad guarantee over returns, as theygenerate their earnings from investments in the equity market. Nevertheless, some of the best­ performing ELSS mutual funds have given consistent and inflationbeating returns in the longrun. This quality is not possessed by the other fixed income tax­ saving investments like PPF andFD.

Conclusion

ELSS mutual fund investment has now become a popular tax saving investment under Section 80C, and it is also ideal for retirement planning and wealth creation coupled with the benefits of lower lock-in period, SIP method of investment, rupee cost averaging risk and no tax on dividends or the benefit of capital gains. ELSS funds should be taken into account by every investor while planning their investment goals.

Disclaimer: The contents herein is specifically prepared by ‘Dalal Street Investment Journal’, and is for your information & personal consumption only. India Infoline Limited or Dalal Street Investment Journal do not guarantee the accuracy, correctness, completeness or reliability of information contained herein and shall not be held responsible.

Source: https://goo.gl/wGHgDF

Interviews :: Home prices, loan rates unlikely to fall in 2018; time to buy: Harshil Mehta

Several cities under the Smart Cities initiative hold a distinct advantage and can be safe bets for ‘smart’ real estate investments, say Mehta.
Sarbajeet Sen | Retrived on 1st Jan 2018 | MoneyControl.com

The real estate sector has seen some major changes in 2017 including ushering in of RERA. It also had to bear the impact of demonetisation, which slowed down sales. In an interview to Moneycontrol, Harshil Mehta, Joint MD & CEO, DHFL, tells how he sees property prices and home loan rates moving in the New Year.

Year 2017 saw the Real Estate Regulation Act (RERA) coming into play. How has the new Act impacted the real estate market?

RERA is a well-timed effort by the government and a good step towards accomplishment of ‘Housing for All by 2022’ and other housing and housing-development related initiatives. Several states have implemented RERA and has positively impacted buyer sentiments as a result of the mandatory disclosures of project details and strict adherence to project deliverables such as the area, legality, amenities and the quality. It has also ushered a more transparent ecosystem for developers and housing finance companies. DHFL has also undertaken a drive to assist developers in various states to help them understand the regulatory implications of RERA and become RERA compliant.

How do you see home prices moving in 2018, especially in the affordable segment?

We do not foresee any reduction in prices in the affordable housing segment because of the increasing demand and the limited supply to meet this demand. To attract buyers and maintain sales volume, developers are launching attractive offers and other benefits to encourage customers to fulfill their aspiration of owning their dream home.

Home loan rates have come down substantially. Do you think there is a likelihood of further lowering of rates by lenders?

Owing to the last few monetary policies, home loan rates have stabilised and we do not foresee any further reduction.

So, for those waiting to buy property, do you think this is a good time?

Yes, it is a good time for the buyer.

What is the loan bracket that you are seeing the largest offtake?

We have been seeing a steady offtake in the affordable housing segment that ranges from Rs 15-30 lakhs. The affordable category has received a strong boost led by the government’s various incentives and efforts to stimulate the industry. All these efforts have started to show visible impact on the ground. Benefits from the recent Credit-Linked Subsidy Scheme (CLSS) under PMAY and lower interest rates have further given a boost to the consumer’s loan eligibility.

What is the home price segment DHFL is targeting?

Since inception, DHFL has always targeted the affordable housing finance segment catering to the low and middle income in the semi urban and Tier-2 and Tier-3 towns. This has remained unchanged for the last 33 years. As we mentioned earlier, we are witnessing strong uptake in the affordable finance segment driven by the incentives and conducive industry dynamics particularly from Tier 2 and 3 towns and cities which are emerging as India’s new growth engines.

Is government’s push for affordable housing having a bearing on loan offtake?

The Indian housing finance industry and, in particular, the affordable housing segment, is witnessing one of the most exciting times. Over the last few months, the Government has been taking several significant, growth-oriented steps to develop demand as well as generate greater supply through impacting policy frameworks towards greater financial inclusion. Granting infrastructure status to the real estate industry, announcing the extended CLSS to include MIG 1 & 2 and most recent announcement on RERA, are some commendable efforts to stimulate demand of affordable housing. These customer friendly measures and efforts have definitely given a strong fillip to loan offtake.

What are the market and sub-markets where you are seeing a high demand for home loan?

Affordable Housing has clearly been a central growth agenda for the Government. Initiatives such as ‘Housing for All by 2020’, PMAY, CLSS, home loan rate cuts and housing regulations such as RERA has considerably sparked interest for affordable housing options across the consumer pyramid. Most of the first-time home buyers fund their property purchase through home loans. As a result, there has been a surge in home loan demand across India specifically the Tier-2 and Tier-3 markets.

What according to you are the best emerging real estate investment destinations across the country?

Post the launch of the Smart Cities Mission in 2015, the Government shortlisted cities from all regions of India having high economic and industrial potential. Smart cities will become catalysts in improving the quality of life and give a major fillip to the real estate in urban locations. Considering the upcoming infrastructure projects and other growth drivers, several cities under the Smart Cities initiative hold a distinct advantage and can be safe bets for ‘smart’ real estate investments.

What more, according to you, needs to be done to boost the housing sector?

For all the benefits to make real impact, customer centricity is becoming key. Financial institutions and HFCs need to focus on making the entire experience of home purchase more seamless and customer friendly. Companies need to think how we can address their financial needs across their whole financial life cycle through customised products.

To further boost the affordable housing sector, external commercial borrowings (ECB) should be extended to housing finance companies to enable onward lending to developers in the segment. Also, single-window clearances is another step towards increasing development in the affordable segment and ensuring timely delivery.

Source: https://goo.gl/S2NiV6

ATM :: How to become rich fast at a young age in India: 5 amazing investment strategies to follow before you turn 30

Everyone wants to be financially secure and well off by the age of 35-40. However, when we are in our 20’s, we tend to live life in the moment and forget saving for the future.
By: Sanjeev Sinha | Updated: November 27, 2017 2:25 PM | Financial Express

ATM

All of us have various financial goals in life. Everyone wants to be financially secure and well off by the age of 35-40. However, when we are in our 20’s, we tend to live life in the moment and forget saving for the future. This is not the right approach towards creating wealth. Therefore, to ensure that you are financially secure and on the right track with your money, here are 5 important investments that you must make before you hit your 30-year milestone:

1. Investment towards tax saving
Considering that you are working and earning, it is important for you to assess your tax liability and take advantage of tax deductions available under Section 80C of the Income Tax Act. “By proper tax planning, you can not only reduce your tax liability but also save some more to invest towards your other goals. One of the best tax-saving instruments is Equity-Linked Savings Schemes (ELSS). It is a type of open-ended equity mutual fund wherein an investor can avail a deduction u/s 80C up to Rs 1.50 lakh for a financial year,” says Amar Pandit, CFA and Founder & Chief Happiness Officer at HapynessFactory.in.

2. Investment towards emergency corpus
There are various events like accidents, illnesses and other unforeseen events that we may encounter in our lives. These events should never occur, but if they do, one needs to be adequately prepared for the same. In critical cases, such events may hamper one’s ability to work and may even lead to a loss in earnings for a few months or years. Hence, “it is advisable to build a contingency corpus, which is equivalent to at least 5-6 months of living expenses. Further, your emergency fund should be safe and easily accessible (liquid in nature) at short notice, in case of an emergency. Hence, savings bank accounts and liquid mutual funds are two options for setting aside the emergency corpus. However, considering that liquid and ultra-short term mutual funds are more tax efficient in nature, it is advisable to park a major portion of your corpus in the same,” says Pandit.

3. Investment towards long-term goals
It is very important to save and invest towards your long-term goals such as marriage, buying a house, starting your own venture, retirement, and so on. You must start with determining how much each goal will need and the savings required to achieve the goal. Once the corpus is fixed, you can invest towards the goal regularly. As an investment strategy, start fixed monthly investments – SIPs (Systematic Investment Plan) in mutual funds. Always remember, the earlier you start investing towards your goals, the longer time your investments will have to grow and the more you will benefit from the power of compounding. Equity mutual funds which are growth oriented are a preferable investment option for long-term goals.

4. Investment towards short-term goals
There are many short-term goals that are recurring in nature, such annual vacation, buying a car or any asset in the near term and so on. For such goals, you are advised to park your funds in liquid or arbitrage mutual funds rather than a savings account. “Mutual funds are more tax efficient than savings accounts and also there are different funds for different time horizons. For example, for goals to be achieved within a year, you can opt for liquid or ultra-short term funds whereas for goals to be achieved post one year, you can opt for arbitrage funds,” advises Pandit.

5. Investment towards health and life cover
Life and health insurance typically are not supposed to be considered as investments. However, both are very important and must be considered as one of the priority money move to be made before turning 30. If you are earning and have a family dependent on you, you must assess and buy the right life insurance term cover for yourself. Further, with costs of health care and medical on the rise, any untoward illness without sufficient cover will have you dip into capital which is unnecessary. Hence, there cannot be any compromise on health insurance. Thankfully, there are various health covers available in the market today. You should opt for the right cover for yourself, depending on your needs and post considering all the options.

Source: https://goo.gl/Abf7TR

ATM :: The quick and safe way to build a credit score

There are many easy ways to quickly improve your credit history and score. But if you are not careful, these measures may even jeopardise your financial security
Shaikh Zoaib Saleem | First Published: Mon, Nov 27 2017. 12 37 AM IST | Livemint.com

ATM

If you need a loan to buy something you cannot fund immediately, you approach a financial institution—typically a bank or a non-banking financial company (NBFC). When you do that, the financial institution runs a background check on you, from its own database (if you are an existing customer) and also from a credit information bureau. The credit information bureau is authorized by the Reserve Bank of India (RBI) to gather information on loans and borrowers from banks and analyse it to arrive at a score of creditworthiness of an individual. If your creditworthiness is good, you would get a loan relatively easily and at better terms. If not, either the loan will be rejected or you will be charged a higher interest rate. This is especially true in case of personal loans. The institutions’ decision to lend is based in large measure on the credit score and the credit report.

What is a credit score?

It is a number based on your credit report, which is a summary of your past and current borrowing and repayment history. If you were regular with repaying loans, including your credit card bills, your credit score is likely to be higher. This score helps banks assess your loan repayment capacity and your chances of defaulting on it. “Credit score is derived from the credit history of an individual. A consumer needs to have a minimum of 6 months of repayment track record on a loan or credit card or closed credit accounts less than 2 years old before a credit bureau can generate a credit score,” said Hrushikesh Mehta, vice-president and head of direct-to-consumer business, TransUnion CIBIL. A credit score is created as your lending and repayment relationship with financial institutions evolves. However, if you are new to credit, here are some ways you can quickly start to build a credit score.

Credit cards or personal loans

If you are new in the workforce, you can start by getting a low-limit credit card from the bank where you have a salary account, said Sumit Bali, senior executive vice president and head-personal assets, Kotak Mahindra Bank Ltd. “Based on their income, banks can give them a card with low limit. Use that card sensibly and build a credit history,” he said.

In the past, people considered taking personal loans to build their credit score. However, with a personal loan you will necessarily have to spend your money in paying the interest, whereas with credit card repayments within the stipulated time, you do not have to shell out extra money. For slightly older professionals, about 35 years old, credit history is not much of a worry if their bank account status and average balance are good, and investments and tax returns are in place. They “don’t really need a credit card to prove credit worthiness. Any bank would sensibly look at it and take a call,” Bali said.

Peer-to-peer (P2P) lending platforms are an emerging option for creating and enhancing your credit history. The RBI has recognized these platforms as special category NBFCs and has mandated them to share lending data with credit information bureaus. “Once the P2P lenders receive their licence, they will be able to begin data submission. Once that happens, P2P lending will become a viable option in helping one build a credit score,” said Mehta. However, in this case too, you will have to pay an interest on the borrowed amount.

In some cases, especially where customers have a long relationship with their bank, the banks may also look at own data to determine creditworthiness, Bali added. “Credit score by and large is a good indicator but it may not be the only indicator,” he said.

Alternative credit scoring

Evaluating someone who has never taken a loan can be difficult. This is where alternative credit scoring comes in. Here, instead of relying on a credit score, lenders consider your transactions and behavioural data like bill payments, online buying behaviour and information from your social media platforms to understand your repayment capacity.

“Often people are refused big-ticket loans like a home loan for the lack of credit history, even if their finances are in order,” said Abhishek Agarwal, chief executive officer and co-founder, CreditVidya, a credit advisory that also works on alternative credit scores.

While the RBI-regulated credit bureaus are currently not allowed to use alternative data for credit scoring; in other developed markets parameters like utility bill payments, insurance premium payments have been used for credit scoring (read more on it here.

However, financial institutions including top public and private sector banks and NBFCs in India, have started using alternative data in multiple verifications and validations across the credit value chain, Agarwal said. “Innovative offerings like pre-approved offers or instant loans are leveraging alternative data from multiple sources to provide seamless customer experience,” he said, adding that leveraging alternative data for credit risk assessment of secured loans is still distant. Banks use the alternative scores “in conjunction with other things, like data that you have about the customer. This is happening for personal consumption products like credit cards and salaried personal loans. We are putting it to use but what is the outcome from that, it is too early to say,” Bali said.

While credit cards and loans help to build a credit history and score, caution needs to be exercised. If used carelessly, these can put you in a debt trap, and ruin your credit history too.

Not just that, you should also keep your digital and transactional behaviour in check, as going forward more and more data could be used to assign you a credit score.

Source : https://goo.gl/m7Ns7g

Interviews :: Home loans slowdown driven by RERA will reverse in 8 months: ICICI Bank honcho Ravi Narayanan

Interview: Ravi Narayanan, senior general manager and head – retail secured assets, ICICI Bank.
By: Shritama Bose | Updated: November 28, 2017 12:20 PM | Financial Express

The home-loan market seems to have slowed down, first because of some postponement of demand with demonetisation, and then with the implementation of RERA. Where do you see things going from here?
The supply in the system had anyway started reducing in the last two years. Between September 2016 and September 2017, supply has dropped by over 10-12% in residential real estate in the top 40-45 cities. Till a year back, the inventory overhang used to be about 18-20 quarters in the industry. Along with supply, absorption of units was also coming down because of various reasons, one of which could be demonetisation. People expected a price correction. With RERA coming in, my estimate is that the supplies will go down still further because the act has put in various guardrails as to how the builder must manage the finances available for the project. This augurs well because inventory overhang should not be so much. The second outcome of RERA will be a rise in customer confidence. So once this whole dust settles, we will see pick-ups rising. So there will be a decrease in inventory and an increase in sales and that should be good for the industry.

Won’t that also cause asset prices to rise?
It will follow a pattern. There is an oversupply right now. If the demand-and-supply gap comes down drastically, then the prices will go up. In the next six to eight months, a lot of consolidation might happen in projects underway, which may not be amenable for prices to go up. Prices will remain, more or less, at the same level or there may be some fall in prices. Also, in the last six-seven years, real estate has seen a slight downturn. Typically, the industry follows an eight-to nine-year cycle. So in my opinion, 2018 will again see a rise in sales.

A development that followed demonetisation was the expansion of the credit-linked subsidy scheme (CLSS) for housing. Are you seeing supply and offtake picking up in that category?
Over 60% of new home launches in the industry in the first half of FY18 had ticket sizes under Rs 25 lakh. Because of this scheme under the Pradhan Mantri Awas Yojana, a lot of projects have started coming up in this category. Builders are also entitled to certain benefits if a part of their projects are of sizes below a certain threshold.

So is the phenomenon of builders allocating more space to smaller units a countrywide one?
This is happening primarily in Mumbai and Pune. Some of it is happening in Chennai and Bangalore. But, it is not happening across the country as yet. That’s partly because you have to keep operating costs and land cost under control to be in affordable housing. It is a very price-sensitive market. However, given the focus on this sector from this government, there’s bound to be more players flocking to it.

In mortgages, banks have continuously been losing market share to housing finance companies (HFCs). Have they actually weaned away bank customers for their growth?
No, because the mortgage industry is really big. The mortgage book of the country is now at Rs 15 lakh crore; over the next few years, at a CAGR (compound annual growth rate) of 20%, it should go up to Rs 50 lakh crore. When the pie is so large, everyone will have a share. It’s just a question of how each player orients themselves. Today, most banks are focused on the metros, while HFCs are operating in the peripheries (of cities). So we are not meeting each other much. But very soon, it will all become one playground. Banks venturing into the peripheries will be much faster because we anyway have branches.