Nifty Housing Index: A Real Estate Boon?


We recently came across this news which says:

‘The current shortage of housing in urban areas is estimated to be ~10 million units. An additional 25 million units of affordable housing are required by 2030 to meet the growth in the country’s urban population – Economic Times Housing Finance Summit.’

Housing problem is real in India, no doubt about that! This problem is even recognised at the policy making level and thus various policies such as ‘Housing For All’ is expected to bring US$ 1.3 trillion investments in the housing sector by 2025. (source: IBEF)

Well history has known the fact that companies that are able to contribute towards solving the existing problems are bound to sustain for a long time. Therefore our role as an investor becomes important to invest in such companies that aims at solving this macro problem.

And NSE’s latest decision to introduce NIFTY HOUSING INDEX is just music to investor’s ears. This recently launched index is designed to reflect the behavior and performance of a portfolio of stocks that broadly represent the housing theme. The index comprises of the largest 50 stocks from eligible basic industries. 

Why a new Index?

Now at this point, an obvious question arises that there already exists a NIFTY Realty Index, then how is the housing index different from it? Well NIFTY Realty Index is designed to reflect the behavior and performance of real estate companies that are engaged in construction of residential and commercial properties. But in case of housing index, the scope becomes much wider and covers various other industries like housing finance, furniture, paints, etc. 

Also over a longer time horizon, in terms of index performance, NIFTY housing index has performed much better than NIFTY realty index. 

NIFTY Housing Index

NIFTY Realty Index

Some Notable Features Of NIFTY Housing Index:

  • Top 10 stocks make up for 58% of the index weight. 
  • Sector weights are capped at 25% each
  • Stocks weights are capped at 10% each
  • The Index is reconstituted semi-annually along with Nifty Broad-based indices

Risk – Return Matrix

Everything boils down to risk and return parameters, so let’s analyze the same for the NIFTY housing index against NIFTY 50.

In terms of returns, NIFTY housing index has outperformed the NIFTY 50 index, on both the 1 year as well as 5 year basis.

In terms of risk measured by standard deviation, NIFTY housing index depicted higher volatility in comparison to NIFTY 50, on both the 1 year as well as 5 year basis. 

Thus higher returns justify the higher volatility for the NIFTY housing index. 

Thus any investor, believing in the growing housing theme in India and wanting a better diversified exposure than NIFTY realty can play using NIFTY housing index. 

Also as per sources – ‘The index is expected to act as a benchmark for asset managers and be a reference index tracked by funds in the form of exchange traded funds (ETFs), index funds and structured products.’

Until next time…….. 😀

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