HDFC Housing Opportunities Fund

The HDFC Housing Opportunities Fund is a relatively new scheme launched only in December 2017 to provide investment opportunities in a high-risk volatile equity market to acquire an impressive AUM as of 30 April 2021 at Rs. 1771.81 crores. Its asset allocation is designed to achieve the fund objectives. 

The fund allocates 80 to 100% assets in high-risk equities and related instruments in housing and allied activities, up to 20% in high-risk equities other than housing, up to 20% in low to medium risk debt and money market instruments, and up to 10% in medium to high-risk REIT and InVIT units. 

The HDFC Housing Opportunities Fund’s Market Cap Exposure indicates its investment strategy to tap the potentially high yielding equities and equity-related instruments. Accordingly, its exposure in percentage points to the NAV is 77.12 in Large Cap, 3.18 in Mid Cap, and 13.37 in Small-Cap equities. 

The top holdings adding up to nearly 70% of the asset value as of 31 March 2021, are cornered by L&T (9.68%), HDFC Bank (9.50%), ICICI Bank (8.17%), NTPC (7.89%), SBI (7.81%), HDFC Ltd (6.98%), and Ambuja Cements (6.93%), to name a few. 

The HDFC Housing Opportunities Fund offers the following plans and options to the investor to choose from:

HDFC Housing Opportunities Fund Regular

• Growth Option**
• IDCW Option**

HDFC Housing Opportunities Fund Direct

• Growth Option**
• IDCW Option**

**The difference in the two options lies in the source of purchase, either from the Fund House directly or from the distributor for the regular option.

**The abbreviated form of Income Distribution and Capital Withdrawal is IDCW. The dividend is declared out of the distributable surplus. The two versions are payout and reinvestment. 

**By default option Growth is selected if no option is specified.

** IDCW payout is the default option if reinvestment is not specified.

Fund Facts

Investment Objective

The HDFC Housing Opportunities Fund aims to generate income and capital appreciation in the long term by sticking to its thematic fund attributes. The asset allocation is dominated by equity and related instruments in entities engaged in housing and allied activities, implying that they reap the benefits from the ever-growing demand in housing and allied businesses in India. 

By nature, investment in equities carries high risk but at the same time delivers the highest yields. The HDFC Housing Opportunities Fund has thus been tagged with a Very High-Risk profile and it suits the investors looking for capital appreciation in the long term regardless of the risk involved. Accordingly, the minimum suggested time horizon is three years. 

The asset allocation strategy adopted by the fund is focused on high-worth blue-chip equities of giants in the construction and the banking sector primarily. While every endeavour is made to achieve the fund objectives, its success is not guaranteed, and hence, there is no guarantee of consistent returns. 

Fund Summary

1. HDFC Housing Opportunities Fund Regular Plan-Growth Option

   • Risk Level: Very High
   • NAV: Rs11.2170 as of 21 May 2021
   • Expense Ratio: 2.16% as of 30 April 2021
   • Fund Started On: 6 December 2017

2. HDFC Housing Opportunities Fund Direct Plan-Growth Option

   • Risk Level: Very High
   • NAV: Rs11.6320 as of 21 May 2021. 
   • Expense Ratio: 1.21% as of 30 April 2021.
   • Fund Started On: 6 December 2017.

Fund Returns Summary Table: Performance as of 31 March 2021

1. HDFC Housing Opportunities Fund Regular Plan-Growth Option

   Period	Return %	Benchmark Returns %
   Last 1 year	67.47	90.91
   Last 3 years	3.36	14.37
   Since Inception	1.71	13.18

1. HDFC Housing Opportunities Fund Direct Plan-Growth Option

   Period	Return %	Benchmark Returns %
   Last 1 year	68.50	90.91
   Last 3 years	4.37	14.37
   Since Inception	2.78	13.18

Cumulative Pros and Cons 

Benefits of HDFC Housing Opportunities Fund

Some of the critical benefits accrued out of the HDFC Housing Opportunities Fund are:

• Brand Equity: HDFC AMC, commonly known as the HDFC Mutual Fund, holds sway as market leaders in the equity-oriented Mutual Fund schemes with an enviable track record to deliver handsome returns on their portfolio. The thematic fund allocating assets in equity is their forte, and the investors can repose faith in it. 

• Transparency: as per SEBI regulations, the NAV must be computed daily and made available in the public domain for information dissemination transparently. The investor can constantly track the investment profile and make an informed decision as and when the need arises. Accordingly, the daily NAV is uploaded to the Fund House and the Association of Mutual Funds in India (AMFI) portals.

• Tax Impact: It is sensible for the investor to be aware of the tax implications for investing in an equity thematic equity fund. The extant laws govern all Mutual Fund investments. 

Let us check out the tax provision that may impact the income generated from the HDFC Housing Opportunities Fund:

Capital Gain: 

• Gains up to Rs.1 lac in a financial year for units sold after one year from the purchase date are tax-exempt. 
• Gains over Rs.1 lac under similar conditions are taxed at 10%.
• Gain from units sold within one year from the purchase date is taxed at 15%, regardless of the amount. 
• No tax is payable as long as the units are not sold.

Dividends: 

• Earning in the form of dividend is added to the investor’s income for tax computation at the applicable slab rate.
• IF the dividend exceeds Rs.5000, the Fund House recovers TDS at 10% before distribution.  

Fund House Details

Investors attribute much weight to the Fund House offering a Mutual Fund scheme. As is quite evident, the HDFC Housing Opportunities Fund was promoted by the HDFC Asset Management Company (AMC). 

The company is often referred to as the HDFC Mutual Fund. It is a subsidiary of the HDFC Group, a conglomerate engaged in varied financial services covering Banking, Insurance, Housing and Education Finance, and Mutual Fund. 

The Fund house has emerged as a market leader in the Mutual Fund market, holding an asset value of Rs.4.1 trillion in 9.1 million retail and institutional accounts. 

The Fund house was established in 1999 as a joint venture enterprise comprising HDFC Ltd and Standard Life Investments, based in the UK. After the company went public through the IPO route in August 2018, the company shareholding pattern has changed. 

As of today, the primary stakeholders of the HDFC AMC are:

• HDFC Ltd: The Company has a shareholding stake of 52.8% in the Fund House to the dominating and primary partner in the company.
• Standard Life Investment PLC: The Company is owned by the Standard Life Aberdeen Group, a leading asset manager in the UK and Europe operating globally in the Americas, Asia, Australia, and the Middle East. The company has a 26.9% shareholding in the Fund House. 
• Public: Consequent to the IPO in 2018, the public has a 26.1% shareholding in the Mutual Fund Company. 

Should You Invest in HDFC Housing Opportunities Fund?

The HDFC Housing Opportunities Fund design is such that the investors with a high-risk profile matching the fund risk profile will only allocate funds in the portfolio. The portfolio is confined in a narrow investment focus aligned with the equity theme and can only attract investors looking to create wealth in the long term with a horizon exceeding three years.  

Accordingly, the indicative list below describes the prospective investors in the HDFC Housing Opportunities Fund:

• A resident adult 
• Minor as the sole investor with the natural or the legal guardian
• Karta is entitled to invest on behalf of the HUF
• Partnership firms, including Limited Liability Partnership.
• Corporate Houses, Companies, Public Sector Undertakings, registered Associations, and Societies 
• Banks and Financial Institutions
• Mutual Funds
• NRIs
• Family and Religious Charitable Trusts 
• Entities sponsored by the Indian Armed and Paramilitary Forces 
• Other HDFC Mutual Fund Schemes

Wrapping It Up

Investors in the HDFC Housing Opportunities Fund have to factor in the thematic asset allocation in the portfolio for capital appreciation and wealth creation in the long term. The investment objective and strategy adopted confines asset allocation in equities in entities engaged in housing and allied business activities to reap dividends from the growing housing demand in India. 

However, the very high-risk profile assigned to the fund precludes investors who do not wield a similar profile. In this context, the suggested time horizon is a minimum of three years to corner the expected high yields for wealth creation.

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