Housing Boom in India

As we all know by now that housing market in the U.S. is slowing. Last week the Office of Federal Housing Enterprise Oversight (OFHEO) reported that U.S. home prices grew at an annual rate of 3.5% in the 3rd quarter. Including the 3rd quarter, home prices are up 7.7% in the past year, the slowest in three years. A year ago, prices were rising at 13.4%. In last 5 years, home prices have risen by a whopping 57%. Also, according to an estimate released by the Commerce Department, sales of new homes fell 3.2% in October. New-home sales are now down 25.4% in the past year.

Perhaps this is the time to utter that good old Indian saying in Sanskrit 'Vasudhaibo kutumbakam' which means 'the whole world is my family'. It is time to take a global view and look elsewhere and what about India? Yes, India is the country where demand for housing is on the rise -- in fact in great demand with the middle class families steadily embracing more and more wealth throughout the nation. The Rich class is also trying to grab more square feet of their luxurious existence in hot markets like in Mumbai or Bangalore or New Delhi or Kolkata. And do not forget the Non Resident Indians, popularly called NRI, who are pouring in money to have a place of luxury as their vacation home.

Unfortunately, for average investors in US, there are no direct plays that can reap the full benefit of this housing boom in India, but there exist at least two indirect plays in the form of American Depository Receipts (ADR). They are two of India's fastest growing banks are the largest lenders that cater to the housing sector: Icici Bank (IBN) and Housing Development Finance Corporation or HDFC Bank (HDB).

The HDFC Bank is owned by HDFC Housing, one of the largest housing development finance companies in India. Icici Bank now operates in 14 countries a key player in the fast growing remittance market for NRIs who need to send money back to their homes. It now offers remittance services to customers who can send money to India, Sri Lanka and the Philippines.

Both these banks have gained good foothold in India's real estate market as well as the financial sector. With support from India's booming economy, these two stocks are supposed to perform great as a long term investment.

Disclaimer: We do not own these 2 stocks in our personal portfolio