Top Housing Finance Stocks to Invest in 2024

A Historic Commitment to Housing

Shortly after being sworn in for a historic third term, Prime Minister Narendra Modi and his newly formed Union Cabinet announced their first major policy initiative—pledging to build an additional three crore houses under the esteemed Pradhan Mantri Awas Yojana (PMAY) in both rural and urban areas. This move reaffirms the NDA government's dedication to the "housing for all" initiative, a commitment reflected in the increased budget allocations over the last two years and other recent government pronouncements. Given the critical role of the housing sector in socio-economic development and with the nation's population continuing to grow, the drive for affordable housing is gaining further momentum.

Government Initiatives Fuelling Sector Growth

Since June 2015, the government has been actively promoting the Pradhan Mantri Awas Yojana – Urban (PMAY - U), facilitating the construction of over 4 crore houses with essential amenities over the last decade. Echoing its dedication to this sector, the newly-formed government aims to construct an additional 3 crore houses under PMAY in the next five years, with a significant focus on the rural segment through the PMAY-Gramin scheme initiated in November 2016. The latest budget for FY25 under PMAY, presented in the interim Budget 2024, earmarks Rs 80,671 crore, with two-thirds designated for PMAY-G.

Opportunities for Housing Finance Companies (HFCs)

The renewed push for affordable housing is a boon for Housing Finance Companies (HFCs), particularly in the affordable segment catering to loans up to Rs 15 lakh. Expected to expand at a CAGR of around 30% during FY24-25, as per CARE ratings, this segment is ripe with opportunities spurred by strong policy support and increasing demand.

Top Housing Finance Stocks to Watch

Following the recent elections, the housing finance sector has experienced a significant uptick. Companies like LIC Housing Finance and Repco Home Finance stand out as undervalued despite their healthy return metrics. Additionally, HUDCO is poised to reap benefits in this evolving market.

Despite premium valuations, emerging players such as Home First Finance and the newly listed Aadhar Housing Finance are also garnering attention for their potential in long-term wealth creation. Home First Finance is recognized for its consistent growth and expanding asset base. On the other hand, Aadhar (the largest entity in the affordable housing finance sector), despite its limited operating history offers a compelling opportunity thanks to its strong investor backing and rapid growth trajectory.

Conclusion: A Promising Horizon for Investors

As the government continues to strengthen its commitment to enhancing housing accessibility, the outlook for housing finance companies is becoming increasingly optimistic. Investors should closely monitor this sector, focusing on companies that are well-positioned to capitalize on these developments. Overall, the housing finance sector presents a fertile ground for investment, poised for growth amidst expanding government initiatives.

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